Health Shield bucks industry trend in Solvency II implementation

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Health Shield – the award-winning corporate health cash plan provider – is bucking the industry trend, ahead of the long-awaited implementation of Solvency II.

The non-profit-making Friendly Society is putting the final procedures in place, in order to meet the capital adequacy regime’s requirements set out by the European Union (EU).

Health Shield began a comprehensive review of its own risk and capital management procedures in 2008. It now intends to introduce those changes 12 months ahead of the EU’s planned implementation date – unlike a significant number of UK insurance companies, which admit to being under prepared.

Last month, industry research revealed that 68 per cent of insurers have reduced their Solvency II implementation programme. According to the PwC survey, the majority of companies expect the legislation to fully come into force in 2016. As a result, a large proportion have scaled back on activity, with 58 per cent admitting that they would not be ready to submit their first Solvency II quarterly return by 2014.

Courtney Marsh, who was appointed as chief risk officer in 2010 in order to spearhead the process, said: “Solvency II is not just about demonstrating that an insurer is solvent. It is much more about how we manage and mitigate risk to enable us to provide better value for our members.

“What is clear is from the research is that insurers need to have a better understanding of the risks they face and their capital implications. This in turn will help to increase financial security, while allowing providers to improve their offering to customers.”

In the last two years, the health cash plan provider has developed an extensive range of Solvency II-compliant initiatives. These include the development of its Own Risk and Solvency Assessment (ORSA) policy; as part of the policy, Health Shield will be completing its first ORSA report in 2013. In addition, it has also set up a balanced scorecard to work alongside the risk register, with all employees having sat and passed a computer-based bespoke risk training course.

Marsh added: “My role is dedicated to managing risk within the society and central to this has been the development of a bespoke capital model. With that process now finalised, Health Shield can complete balance sheet and revenue account projections on a Solvency II basis. These projections are central to our business plan development and monitoring, and the first projections were produced by Health Shield’s actuarial function in December 2012.”

According to the FSA, no new timetable has been confirmed for the implementation of the EU-wide capital requirements and risk management standards. Despite industry speculation, the independent non-governmental body has stated that the current timetable remains, with transposition by 30 June 2013 and implementation from 1 January 2014. Its initial implementation was due to be rolled-out in January 2013.

He continued: “Health Shield’s risk culture has become much more mature over the last two years. Employees now feel happy to raise risks with their line manager, or myself, and key risk team meetings happen frequently during the year. Our Product Development Focus Group (PDFG) has also reviewed all of the Society’s products – central to the review was the risks they posed to Health Shield and the capital requirements of each product.”

In 2012, Health Shield completed a major overhaul of the Society’s IT infrastructure. Its new, state-of-the-art risk dashboard enables the health cash plan provider to access enhanced, real-time management information at the touch of a button, as well as efficiently interrogate data to make better-informed decisions.

health shield solvency ii