This session will provide information on the current state of the European Union's Solvency II regulatory initiative along with ways in which its fundamentals can lead to an enhanced enterprise risk management framework. A critical piece of Solvency II regulation will be the development of internal capital models and how they are used to manage risk and make strategic decisions. We will discuss the attributes of an effective capital model and uses beyond defining regulatory capital.
The session will also include a presentation of PillarOne, an open source modeling platform, as well as the modeling approach and simulation results of a partial internal model comparing Solvency I and Solvency II requirements.
Finally, we will talk about how capital models and other operational improvements can lead to a new ERM paradigm, one in which the risk function within an organization not only focuses on what can go wrong but also on what can go right and becomes part of the strategic decision making process.