Financial Services Library

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• International Financial Reporting Standards
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Other UK publications

• Ernst & Young's Point of View examining the issues and impact of the FSA's RDR
  This ‘Point Of View’ document examines the issues and implications coming from the FSA’s Discussion Paper 07/1 – A Review of Retail Distribution (“RDR”), published on Wednesday 27th June.

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• Complaints Handling in Financial Services Needs Significant Improvement
  UK financial services providers have significantly more to do in relation to root cause analysis, management information and understanding the cost implications of poor complaint handling, according to a new survey of 44 leading retail financial services providers by Ernst & Young. 1.4Mb, January 2007




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• Changes to Life insurers’ reserving and capital requirements

  This publication, which is only applicable to life insurers, comments on the accounting implications of changes to life insurers' reserving and capital requirements introduced by the FSA.

  The changes were proposed by the FSA in September 2006 through a consultation paper, CP06/16. On 11 December 2006, the FSA released a policy statement (PS06/14) which included revisions to certain proposals introduced earlier in CP06/16. It is the FSA's intention to change the valuation of life insurers' technical liabilities, extending the 'realistic' capital regime to non-profits business and thus better aligning the capital requirements to their risks. These changes are intended to reduce the amount of regulatory capital life insurers will have to hold, whilst maintaining a high standard of protection for policyholders and investors. The changes will also prepare the life insurance industry for the move towards the economic and realistic approach to capital requirements, due to come into effect under Solvency II.

  In accounting terms, the proposals may result in lower long term business provisions with possible adjustments to tax and Deferred Acquisition Costs.

  Read Prudential changes for Life Insurers 300K, Dec 2006

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• Changes to Life insurers’ reserving and capital requirements
  HMRC has invited responses to the FSA consultation paper on changes for life Insurers (CP06/16). Read Ernst & Young's Tax team's response to HMRC. Changes for Life Insurers

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• Managing Risk & Compliance
  Find out more about out latest survey and report.

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• Ernst & Young's 2006 Global Basel survey
  Ernst & Young's 2006 Global Basel Survey indicates that senior banking executives are beginning to appreciate the long-term business impacts of Basel II on their organizations and the banking industry as a whole. Key anticipated benefits include more dynamic portfolio management, greater use of hedging and derivatives, and an increased use of risk-based pricing.

  Read Ernst & Young's 2006 Global Basel survey. 806K, May 2006

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• Contract Certainty Challenges
  There has been considerable discussion and action in the London insurance market recently in relation to contract certainty. Effort is being made to improve the level of confidence that insurers, brokers and buyers can have in the contracts and documentation exchanged between them.

  However, we felt that opinions voiced at market seminars and conferences in relation to what commercial buyers of insurance actually thought about the matter were not based on any real consultation process. We approached AIRMIC and they agreed that a survey of AIRMIC members would prove a useful contribution to market debate and initiatives.

  We feel that the views of AIRMIC members are particularly important to the debate as many of the members are experienced in negotiating bespoke wordings and represent large, complex organisations which by their nature have large claims. It would seem that contract uncertainty is more of a problem for buyers, sellers and intermediaries alike where the chance of large losses is greatest and the probability of standard wordings being used is relatively small. In addition to being a problem for large and mid-sized commercial enterprises, uncertainty in relation to large corporate risks and claims can have a substantial but indirect effect on consumers and small businesses. As one survey participant put it, “the context is catastrophe risk”. We can therefore envisage the situation where the insurance market’s success in achieving the levels of contract certainty that will satisfy the Financial Services Authority might hinge on their success in the large commercial risks area… the one which will be most difficult to deal with, at least at primary levels.

  Read the results of our survey ( 553K, November 2005) and our press release.

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• UK and Continental European Embedded Value Results 2004 Year-End
  Aegon, Aviva, ING and to a lesser extent Allianz, have set the pace with early adoption of European Embedded Value (EEV). The methodologies have been updated to incorporate more explicit allowance for risk and there has been extensive disclosure. The groups that have already gone down the EEV road have all used real-world modelling of their options and guarantees and have set their RDRs on the basis of a “top down” group Weighted Average Cost of Capital approach. At the same time, there has been considerable debate in the life insurance industry about market-consistent valuation techniques as a basis to allow for financial risks. Several companies are experimenting with Market-Consistent Embedded Values (MCEV) but it remains to be seen if any companies will publish on this basis now that the CFO Forum has agreed that MCEV would be compliant with EEV Principles. While MCEV has a strong theoretical appeal, it may not be accepted by management or directors. Companies will need time to understand how an MCEV approach compares with “top-down”, or other approaches, as a methodology for measuring and managing profitability for each of the component parts of their business. 1Mb, August 2005