What is the definition of solvency margin, and what is its importance?
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 regulations.
In this context, the solvency margin is the extra capital that can accommodate 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 and approval of solvency margin report prepared by the insurance company and its actuary.
What is the methodology adopted by the independent audit firm in implementing the scope of work?
- Law No. 125 of 2019 regarding the Regulation of Insurance and its Executive Bylaw
- International Standards on Auditing issued by the International Auditing and Assurance Standards Board (IAASB)
- 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.
- Provide shareholders and stakeholders with independent reports on the appropriate solvency margin for the business.
What are the services offered by Baker Tilly Kuwait?
Preparing Assurance Report on Review and Approval of Solvency Margin