The two phase approach (first phase using Solvency II capital models only, second phase full Solvency II balance sheet), known as ICAS+, is optional, and any insurer choosing not to adopt ICAS+ will remain subject to the ICAS requirements.
Insurers need to determine whether they are eligible for adoption of ICAS+ and if so, whether to stay under ICAS or move to ICAS+. This paper outlines key features of the ICAS+ regime and factors that insurers may wish to consider in making this decision.
There are a number of important questions to be answered if the ICAS+ proposals are to be widely adopted including whether the FSA will allow firms to take credit for reductions in required capital that arise through transition to ICAS+. Nevertheless, we expect there will be a number of firms who choose to adopt ICAS+, especially given the insights that may be able to be gleaned about their Solvency II Internal Model.
It is possible that some smaller companies and Standard Formula companies will be concerned that the focus once again appears to be on Internal Model companies only. However, while the specific ICAS+ regime may not be an option for them, these companies can continue to develop and embed other elements of their Solvency II programme such as their ORSA and wider risk management processes.
