CEIOPS' Advice for Level 2 Implementing ... - EIOPA - Europa
CEIOPS' Advice for Level 2 Implementing ... - EIOPA - Europa
CEIOPS' Advice for Level 2 Implementing ... - EIOPA - Europa
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e to use the simplified calculation of the SCR to fix the overall risk margin<br />
during the year (CoCM(t)). This can be done e.g. in the following manner:<br />
CoCM(t) = (CoCM(0)/SCR(0))·SCR(t), 0 < t < 1,<br />
where CoCM(0) and SCR(0) is the overall risk margin and the SCR at the<br />
beginning of the year, respectively, while SCR(t) is the SCR calculated<br />
during the year (by a simplified method).<br />
3.455 In a second step the overall risk margin could be allocated to the individual<br />
lines of business in the same proportion as at the beginning of the<br />
year, that is<br />
CoCMlob(t) = (CoCMlob(0)/CoCM(0))·CoCM(t), 0 < t < 1.<br />
3.456 This approach takes into account that the risk margin depends heavily on<br />
the SCR. However, it is the present and future SCRs related to the reference<br />
undertaking and not the SCRs <strong>for</strong> the original undertaking that are<br />
used in connection with the risk margin calculations. Accordingly, in this<br />
simplification it is implicitly assumed that the changes in the SCRs related<br />
to the original undertaking are reasonable proxies <strong>for</strong> the changes in the<br />
SCRs related to the reference undertaking.<br />
3.457 All methods referred to above seem to have drawbacks and it may be<br />
premature at the present stage to recommend any specific method to be<br />
used in the calculations of the risk margin during the year.<br />
3.458 However, as the undertakings are getting more experienced with how the<br />
calculation of technical provisions works under the Solvency II framework,<br />
including how the best estimate of technical provisions may vary during<br />
the year, simplified methods as those indicated in the previous paragraphs<br />
may be refined and probably make it easier to make recommendations<br />
with respect to the method(s) to be applied as default simplification(s).<br />
93/112<br />
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