CEIOPS' Advice for Level 2 Implementing ... - EIOPA - Europa

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3.235 This method should be based on an appropriate number of years where reliable data are available so as to achieve a reliable and robust calculation. The more years of experience available the better quality of the mean obtained. 3.236 Obviously this method only applies where the incurred and reported claims provision has been valued without considering IBNR, for example it has been assessed using some of the aforementioned simplifications. 3.2.3.4. Incurred but not reported claims provision. Second simplification 3.237 Description. This simplification should apply only when it is not possible to apply reliably the first simplification. In this simplification the best estimate of non reported claims (IBNR) is estimated as a percentage of the provision for reported outstanding claims. 3.238 Calculation. This simplification is based on the following formula: where Provision IBNRLOB = factorLOB_U * PCO_reportedLOB, PCO_reportedLOB = provision for reported claims outstanding factorLOB_U = factor specific for each LOB and undertaking. 3.239 Criteria for application. Further the general requirements set out to use simpifications, this method may apply only when it is not possible to apply reliably the first simplification due the number of years of experience is insufficient. Obviously this method only applies where the incurred and reported claims provision has been valued without considering IBNR, for example it has been assessed using some of the aforementioned simplifications. 3.2.3.5. Simplification for claims settlement expenses 3.240 Description. This simplification estimates the provision for claims settlement expenses as a percentage of the claims provision. 3.241 Calculation. This simplification is based on the following formula, applied to each line of business: where: Provision for ULAE = R * [ IBNR + a * PCO_reported ] R = Simple average of Ri (e.g. over the last two exercises) and Ri = Expenses / (gross claims + subrogations). IBNR = provision for IBNR PCO_reported = provision for reported claims outstanding a = Percentage of claim provisions (i.e. set as 50 per cent 65 ) 3.242 Criteria for application. Further the general requirements set out in this advice, this method is an allowable simplification when expenses can 65 See QIS4 Specifications, TS.IV.g.4 50/112 © CEIOPS 2010
easonable be supposed proportional to provisions as a whole, this proportion is stable in time and the expenses distribute uniformly over the lifetime of the claims portfolio as a whole. 3.2.3.6. Simplification for premium provision 3.243 Description. This simplification estimates the best estimate of the premium provision when the undertaking is not able to derive a reliable estimate of the expected future claims and expenses derived from the business in force. 3.244 Calculation. This simplification is based on the following formula, applied to each line of business: Best estimate Premium provision = [ Pro-rate of unearned premium over the life of the premium + Adjustment for any expected insufficiency of the premium in respect future claims and expenses ] / ( 1 + rf_rate_1y / 3 ) time BE = (Present value of future premiums on existing contracts+Provision for unearned premiums + Provision for unexpired risks)/(1+i/3 66 ) where rf_rate_1y is the risk-free interest rate 1-year term 3.245 Criteria for application. Further the general requirements set out in this advice, this method is an allowable simplification when the premium provision is supposed to decrease at an even rate during the forthcoming year. 3.246 CEIOPS reminds that QIS4 specifications already contained a simplification regarding premium provisions, which remains as an additional possibility to be tested again in QIS5. 66 See QIS4 Specifications, TS.IV.h.10 51/112 © CEIOPS 2010
Page 1 and 2: CEIOPS e.V. - Westhafenplatz 1 - 60
Page 3 and 4: 1. Introduction 1.1. In its letter
Page 5 and 6: 2.2.2. The following recitals provi
Page 7 and 8: “[…]Where, in specific circumst
Page 9 and 10: 3.6 It is noted that in the recital
Page 11 and 12: have in place internal processes an
Page 13 and 14: not be appropriate to reduce this v
Page 15 and 16: 3.36 Hence where an (re)insurance u
Page 17 and 18: Scale 3.46 Assigning a scale introd
Page 19 and 20: “scale” that will apply in all
Page 21 and 22: circumstances of its omission or mi
Page 23 and 24: 3.81 Under these circumstances, it
Page 25 and 26: • the level of certainty i.e. the
Page 27 and 28: 3.105 All in all, at least the foll
Page 29 and 30: the chosen valuation method. If it
Page 31 and 32: development, so that it is likely t
Page 33 and 34: • As part of supervisory guidance
Page 35 and 36: case the threshold is not exceeded.
Page 37 and 38: if the threshold is not exceeded th
Page 39 and 40: principles. In following paragraphs
Page 41 and 42: sign ( x) = −1 if x < 0 . 3.179 E
Page 43 and 44: 3.193 The time value of the investm
Page 45 and 46: distribution to policyholders as th
Page 47 and 48: • assume independency between ass
Page 49: company or new line of business, al
Page 53 and 54: incurred when the method is applied
Page 55 and 56: 3.261 The general rule for calculat
Page 57 and 58: • the loss absorbing capacity of
Page 59 and 60: 3.285 As a consequence of this, the
Page 61 and 62: SCR for the individual lines of bus
Page 63 and 64: • the loss absorbing capacity of
Page 65 and 66: OPRU,lob,>0 = an approximation of t
Page 67 and 68: Life insurance 3.323 With respect t
Page 69 and 70: 3.330 With respect to health insura
Page 71 and 72: eing applicable for life insurance
Page 73 and 74: 3.351 The structure of the health u
Page 75 and 76: ∆rn = the absolute decrease of th
Page 77 and 78: the methods to be used for projecti
Page 79 and 80: CEIOPS’s draft advice on the valu
Page 81 and 82: 3.392 In this context, the technica
Page 83 and 84: clearly the present difficulties of
Page 85 and 86: • Even if the undertaking’s rei
Page 87 and 88: information regarding the RBNS-clai
Page 89 and 90: CEIOPS’ Advice Simplifications re
Page 91 and 92: 3.5. Quarterly calculations 3.444 A
Page 93 and 94: e to use the simplified calculation
Page 95 and 96: Annex A. Example to illustrate the
Page 97 and 98: Annex B. Some technical aspects reg
Page 99 and 100: is accurate because the payment of
Page 101 and 102:
C.6. The individual elements sketch
Page 103 and 104:
UMRU,lob,≥0 = max{∑ ≤ t Durmo
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E.5. The considered proxies based o
Page 107 and 108:
E.14. The following criteria should
Page 109 and 110:
“The gross-to-net proxy was used
Page 111 and 112:
where Durmod denotes the modified d
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