Solvency Margin review and approval is an assurance service provided by an independent auditor. It involves reviewing and approving solvency margin reports prepared by insurance companies to verify the extent of their compliance with solvency requirements set under the instructions issued by Kuwait Insurance Regulatory Unit.
What is the definition of solvency margin, and why is it important?
The solvency margin is the excess value of a company’s actual assets over its liabilities, enabling it to meet its entire obligations and settle the outstanding claims amounts immediately upon falling due without resulting in difficulties facing the company’s business or weakening its financial position, in accordance with the recognized international standards and any other standards set by the Executive Bylaw of Regulation of Insurance Law.
In this context, the solvency margin is the extra capital that can absorb the claims that the company is likely to incur and protect it from the risks of business interruption.
What is the mandate to appoint an independent audit firm for review and approval of the solvency margin report?
Insurance companies are required to appoint an IRU-registered independent audit firm every three years.
Law No. 125 of 2019 regarding the Regulation of Insurance, Chapter 6, “Obligations of Companies Licensed to carry on Insurance Business”, Section 1, “Financial Obligations”, Article 35 sets forth as follows:
Article (35)
… The solvency margin and technical reserves shall be reviewed every three years by an IRU-registered independent audit firm.
What is the scope of work of the independent audit firm?
Conduct review of and approve solvency margin report prepared by the insurance company and its actuary.
What legislation and international standards does the independent auditor adopt in preparing the Review and Approval of Solvency Margin Report?
- Insurance Regulatory Unit legislation and regulations
- International Standards on Auditing (ISA)
- International Standards of Actuarial Practice (ISAPs) issued by the International Actuarial Association
What is the added value to business entities from Review and Approval of Solvency Margin Reports?
- Ensure compliance with the regulatory requirements issued by the Insurance Regulatory Unit.
- Promote confidence of shareholders and stakeholders.
What are the services offered by Baker Tilly Kuwait?
Preparing Assurance Report on Review and Approval of Solvency Margin
Why Baker Tilly?
- Baker Tilly in Kuwait is a member of Baker Tilly International network based in the UK, ranked amongst the top 10 global accounting networks.
- Auditors in Baker Tilly Kuwait are licensed by Ministry of Commerce and Industry and are registered with the regulatory authorities, e.g., Central Bank of Kuwait, Capital Markets Authority and Insurance Regulatory Unit.
- Extensive experience in providing Solvency Margin service to companies operating across various business sectors in the State of Kuwait.
- Highly experienced bilingual team with specialized academic qualifications and professional certifications.
- Commitment to performing Solvency Margin engagements according to predefined timelines, with no delays and responsiveness to client requirements.