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

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∑ − n 1 s= k SCR CoCM k = CoC ⋅ . ( 1 + r s s+ 1 ( s+ 1, k) ) B.7. If the reference undertaking covers CoCMk with risk-free assets that match the cash-flow pattern of the formula, then these assets earn during the year from t=k to t=k+1 an interest of ∑ − n 1 s= k SCR CoC ⋅ r( s, k) , ( 1 + r s s+ 1 ( s+ 1, k) ) and the unwinding of the margin in that year (including the interest) yields an expected profit of CoC·SCRk as can easily be calculated The capitalisation scenario B.8. The reference undertaking receives the obligations as well as assets to cover best estimate and risk margin from the original insurer. The reference undertaking has no own funds to cover the SCR relating to the obligations. In order to meet the capital requirement, the reference undertaking requests external capital of the amount SCR0 for one year. The interest on this capital is CoC+r(1,0), so in return, the reference undertaking has to pay back the amount (1+CoC+r(1,0))·SCR0 at the end of the year. B.9. Under the assumption that the obligations run off according to best estimate assumption, the position of the reference undertaking at the end of the year (t=1) is as follows: • The development of the best estimate does not affect own funds: the assets covering the best estimate in t=0 plus the risk-free rate earned during the year equal the claims payments during the year and best estimate at the end of the year. • The unwinding of the risk margin produces own funds of the amount CoC·SCR0. • The assets covering SCR0 earn a risk-free rate of r(1,0)·SCR0. • The repayment of the capital reduces own funds by (1+CoC+r(1,0))· SCR0. To sum up, the own funds of the reference undertaking are reduced by the amount SCR0, so that own funds are zero again. B.10. Therefore, the reference undertaking is at t=1 in the same situation as at t=0. It has to raise new capital of the amount SCR1 in order to meet the SCR. The process outlined above can be iterated until run-off of the liabilities. At t=n, the reference undertaking is relieved from the insurance obligation and no own funds will be left. B.11. This proves that the formula stated in this advice is in line with the risk margin definition of the Level 1 text. In particular, the way of discounting 98/112 © CEIOPS 2010
is accurate because the payment of the amount CoC·SCRs is made at t=s+1. 100 100 Indeed, the reference undertaking could agree with the capital provider to pay the spread CoC·SCRs in advance at t=s. But then the value of the spread would be CoC·SCRs/(1+r(1,s)). 99/112 © CEIOPS 2010
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CEIOPS e.V. - Westhafenplatz 1 - 60
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1. Introduction 1.1. In its letter
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2.2.2. The following recitals provi
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“[…]Where, in specific circumst
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3.6 It is noted that in the recital
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have in place internal processes an
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not be appropriate to reduce this v
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3.36 Hence where an (re)insurance u
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Scale 3.46 Assigning a scale introd
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“scale” that will apply in all
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circumstances of its omission or mi
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3.81 Under these circumstances, it
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• the level of certainty i.e. the
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3.105 All in all, at least the foll
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the chosen valuation method. If it
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development, so that it is likely t
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• As part of supervisory guidance
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case the threshold is not exceeded.
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if the threshold is not exceeded th
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principles. In following paragraphs
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sign ( x) = −1 if x < 0 . 3.179 E
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3.193 The time value of the investm
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distribution to policyholders as th
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Page 49 and 50: company or new line of business, al
Page 51 and 52: easonable be supposed proportional
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
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Page 85 and 86: • Even if the undertaking’s rei
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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: Annex B. Some technical aspects reg
Page 101 and 102: C.6. The individual elements sketch
Page 103 and 104: UMRU,lob,≥0 = max{∑ ≤ t Durmo
Page 105 and 106: 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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CEIOPS' Advice for Level 2 Implementing ... - EIOPA - Europa

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