Risk Adjustment previsto dai principi di IFRS 17 comparato al Risk Margin previsto dal regime di Solvency II

Solvency II entered into force in 2016 and it was an innovation for the regulatory framework. IFRS 17 - Insurance contracts will be implemented in 2021 and it will represent a breakthrough for the accounting framework. Both the frameworks introduce changes that insurance companies shall face. The present dissertation focuses on some newly introduced points that may create a sort of confusion between the two frameworks. In particular, the new IFRS 17 Standard requires companies to deal with different models ¿ used to measure insurance contracts liabilities ¿ and with an explicit risk margin called Risk Adjustment. Companies shall make informed choices to select the methodology to apply in order to compute this important amount. Moreover, the Risk Adjustment is involved in the measurement of insurance contracts liabilities and it has implications on the company profitability level as well. IFRS 17 defines it as the compensation an entity requires to bear the uncertainty and the variability of cash flows arising from insurance contracts. In fact, it represents the risk aversion of the company for non-financial risks. To achieve this result, quantile techniques are available as well as a cost of capital approach and the proportional hazard transforms technique. The only requirement by the new Standard is that if an entity uses a technique other that the confidence level technique to determine the RA for non-financial risk, the technique used shall be disclosed together with the confidence level corresponding to the results of that technique. The third chapter investigates available methods together with both their positive and negative aspects. An example will provide different results and will lead to a better understanding of how important a company's point of view is. Solvency II is a regulation adopted by the European Union to improve and to harmonise the prudential framework for insurers within the EU. This concerns the amount of capital that insurance companies shall hold considering their risk profile. It involves an amount called Risk Margin and it shall demonstrate the appropriateness of the entity's technical provisions. In short, it shall be such to ensure that the value of technical provisions is equivalent to the amount that a third-party insurance company would be expected to require to take over and meet insurance and reinsurance obligations. This Directive prescribes the computation of the RM with the cost of capital method. The difference with respect to the Risk Adjustment involves both the meaning of these amounts and the possible way to reach them. To conclude, the dissertation aims to examine the two frameworks under a legal point of view. Dissimilarities are clear also in this case. On the one hand, Solvency II is a legislative act of the European Union and it is binding for all Member States. It deals with three pillars containing the main thematic areas: quantitative requirements, qualitative requirements and disclosure and reporting requirement. On the other hand, IFRS 17 are accounting standards. They are provided by the IFRS Foundation ¿ independent, privately organised not-for-profit organisation ¿ and the International Accounting Standards Board. Only some companies are obliged to apply the Standards in their financial statements. In general, companies will try to exploit synergies between frameworks, however, significant challenges will be inescapable.