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Speaking in a panel discussion on the implementation of the ORSA, Yvonne Schmerfeld, a senior expert on Solvency II at EIOPA, said there was a "linkage" between a firm's internal capital model and the ORSA when it came to quantifying risks. But she insisted the purpose of the ORSA was not to duplicate the requirements of an internal model.
"An internal model is the risk profile at a certain time, while the ORSA is more forward-looking. Firms won't be pushed into developing an internal model by the back door", Schmerfeld said.
In a separate discussion, the deputy director general of the Danish regulator, Finanstilsynet, said too much attention has been paid to the Solvency II's capital requirements and that greater emphasis should be placed on risk management.
Jukka Vesala, deputy director general of Finish regulator Finanssivalvonta, stressed that European rule-makers still had a lot of work to do to achieve the harmonised approach to risk management that Solvency II is looking to achieve. "Solvency II is not just about capital but also good risk management. Solvency II is very principles-based, with high level requirements. This leaves a lot of leeway for supervisors. EIOPA has an important role in harmonising standards. But there is an awful lot of work ahead to harmonise [these] – and EIOPA has a lot of work to do."
Comparing Solvency II to banking's Basel III, Vesala added that Solvency II was more advanced in terms of the risk measurement techniques it employs. "Solvency II takes a whole balance sheet approach. Basel III is more advanced in terms of making sure capital instruments are loss absorbing", Vesala said.
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