Circular

Review of policy years June 2020

16 June 2020

Web-only circular

At its Board meeting on 7 May 2020, the Board reviewed the policy years for the Association and decided on release calls for the open years. At the Committee meeting 12 June 2020, the Committee made a recommendation to close the 2017 policy year.

Policy Year 2017

The Policy year 2017 has had a negative development on claims and has generated a negative result of USD 19 million. Despite the negative result, the Board and the Committee decided to recommend to the Annual General Meeting to close the 2017 policy year without further calls.

Review of Open Policy years

Skuld will apply its internal risk model to calculate the risk of deterioration for each policy year. In contrast to Solvency II where the risk horizon is the next 12 months, the risk of deterioration is calculated for the full development of the individual policy year. The risk model takes into consideration:

  • premium risk
  • reserve risk
  • market risk
  • counterparty risk
  • operational risk

Further, Skuld will apply the value at risk (VaR) with a confidence interval of 99.5% when assessing the risk of deterioration. For current policy years, all risk factors mentioned are relevant. For old policy years, only reserve risk, counterparty risk and operational risk are relevant.

Policy Year 2018

The Policy year is assessed according to the model described above and due to its medium maturity, the relevant risks are reserve risk, counterparty risk and operational risk. The Board decided to maintain the release call at 7.5%, applicable from AGM 3 September 2020.

Policy Year 2019

The Policy year is assessed according to the model described above and due to its maturity, the relevant risks are reserve risk, counterparty risk and operational risk. The Board decided to reduce the release call to 10%, applicable from AGM 3 September 2020.

Policy Year 2020

The Policy year is assessed according to the model described above and since this is the running Policy year all the risk factors above have been taken into consideration. The Board decided to maintain the release call at 15%, applicable from AGM 3 September 2020.

Summary of Policy Years

2016: Closed
2017: Proposed to be closed by the AGM 3 September 2020. Release call 0%
2018: Release call maintained at 7.5%
2019: Release call reduced to 10%
2020: Release call maintained at 15%

Yours faithfully,
Ståle Hansen
President and CEO
Assuranceforeningen Skuld (Gjensidig)