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

3.261 The general rule for calculating the risk margin (per line of business) as
summarised in the previous paragraphs applies to all undertakings
irrespective of whether the undertaking calculates its SCR using the
standard formula or an internal model.
3.262 If the undertaking is using the standard formula for the calculation of its
solvency capital requirement, all present and future SCRs for a given line
of business (that is all SCRRU,lob(t) for t ≥ 0) should in general be calculated
as follows:
SCRRU,lob(t) = BSCRRU,lob(t) + SCRRU,lob,op(t) – AdjRU,lob(t),
where
BSCRRU,lob(t) = the Basic SCR for the given line of business (lob) and
year t as calculated for the reference undertaking ,
SCRRU,lob,op(t) = the partial SCR regarding operational risk for the
given line of business (lob) and year t as calculated
for the reference undertaking; and
AdjRU,lob(t) = the adjustment for the loss absorbing capacity of
technical provisions for the given line of business
(lob) and year t as calculated for the reference undertaking.
Regarding the projections to be made for adjustments due to the loss
absorbing capacity of technical provisions, see CEIOPS’ advice DOC-46-09.
3.263 The present and future basic solvency capital requirements for a given line
of business (i.e. BSCRRU,lob(t) for all t ≥ 0) should be calculated by first
using the relevant SCR-modules and sub-modules per line of business, and
then aggregating the resulting SCRs (per line of business) based on the
correlation assumptions given in Annex IV of the Level 1 text.
3.264 In the context of risk margin calculations, the relevant modules and submodules
for calculating the basic solvency capital requirement per line of
business cover the following risks: 69
(a) underwriting risk with respect to the existing insurance and reinsurance
obligations,
(b) counterparty default risk with respect to ceded reinsurance and SPVs,
and
(c) unavoidable market risk.
3.265 If the undertaking uses an internal model, the assessed SCR has to cover
at least the risks covered in the standard approach and referred to in CP
42.
3.266 Where the maturity of the obligations is more than one or two years, a full
calculation of the risk margin according to the general approach sketched
69 Cf. assumption 4 and 5 regarding the reference undertaking as laid down in CEIOPS-DOC-36-09.
55/112
© CEIOPS 2010