Coface's partial internal model approved; solvency ratio at 187%

Written by Adam Cadle

05/12/2019

Coface has received authorisation from the French Prudential Supervision and Resolution Authority (ACPR) to use the group’s partial internal model for calculating its regulatory capital requirement under the SII Directive as soon as at 31 December 2019.

The second pillar of our Fit to Win strategic plan aims to improve the capital efficiency of Coface’s business model. The partial internal model is a key tool to attain this objective. The validation of the model is therefore a critical milestone towards the achievement of all the targets of the plan.

Coface's partial internal model has been the subject of extensive discussion and review by the group's supervisory authorities since the launch of the pre-application phase in 2016. This model covers the insurance underwriting risk module. The other modules (market risk, underwriting risk, operational risk) use the parameters of the standard formula.

Coface has already started to use the partial internal model in some key processes (strategic planning, capital management) and will soon extend its usage to other key functions, such as pricing and underwriting.

Coface’s solvency ratio, as defined by the partial internal model, is 187% at 31 December 2018, an 18 point improvement versus the standard formula.

In parallel, Coface is actively working to improve the calculation of its factoring business capital requirement. The usage of a CRD IV compliant methodology could bring an additional improvement of around five points for the group’s global solvency ratio.

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