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KPMG’s survey on Free Capital Generation

KPMG’s survey on Free Capital Generation

Free Capital Generation is one of the key themes on the board’s agenda. An insurance company’s ability to generate 'Free Capital' reflects the potential to pay out dividends or make strategic investments in the future. This survey shows best practices in Free Capital Generation reporting in the European insurance industry.

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​Free Capital Generation (FCG) is a key disclosure metric for European insurance companies. An insurance company's ability to generate 'Free Capital' reflects the potential to pay out dividends or make strategic investments in the future.

KPMG has conducted a survey among European Insurance companies on they report on FCG. Although FCG is a relevant metric in internal management reporting as well, the survey is solely based on public disclosures in 2019 on YE2018 numbers.

We found the following messages:

  • FCG reporting is a key element in analyst presentations, limited appetite for providing FCG forecasts
  • All companies reporting on FCG now also report on the 'sustainable' component of the FCG
  • Positive trend in the 'sustainable' FCG (2016-2018)
  • Dividend policies remain IFRS-oriented
  • Improving FCG is seen as a key management goal
  • No clear trend in SCR market risk that indicates substantial re-risking or de-risking of the asset portfolio
  • Diversification benefit is generally stable over time

The full analysis and conclusions on the survey can be found below. If you want to discuss the topic, and what your organization can do on FCG, feel free to contact the authors. KPMG's Free Capital Generation framework can help to identify opportunities to improve the FCG position, and the ability to generate FC in the future.

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