Answers to the European Commission on the ... - Eiopa - Europa

assistance is much appreciated, <strong>the</strong> focus of QIS will be on <strong>the</strong> most
critical areas.
13.15 Agreeing on data definitions, along with <strong>the</strong> valuation, methodology
and assumptions <strong>to</strong> be applied, will be important in order <strong>to</strong> achieve an
acceptable degree of comparability. In this respect, it appeared from
<strong>the</strong> PFS that guidance is needed on <strong>the</strong> classification and inclusion of
financial instruments, valuation techniques, and on <strong>the</strong> level of
prudence (risk margin). The PFS has resulted in an extensive list of
practical issues, which will be considered by CEIOPS in its fur<strong>the</strong>r
technical work.
13.16 In order <strong>to</strong> develop spreadsheets and write guidance for <strong>the</strong> various
QIS, <strong>the</strong> CEIOPS FSC task force will depend on input from o<strong>the</strong>r
CEIOPS Working Groups, especially <strong>the</strong> Pillar I Working Group. The
aspects which may need <strong>to</strong> be considered include:
• definitions/guidance <strong>to</strong> <strong>the</strong> valuation of assets;
• definitions/guidance <strong>to</strong> <strong>the</strong> valuation of technical provisions for
life and non-life including general principle (e.g. best estimate
plus risk margin), a definition of when an insurance benefit is
guaranteed and when it should be classified as an option, a
definition of risk margins (e.g. market value margin), interest
rate term structures etc.;
• impact of reinsurance;
• segmentation and classification of risks;
• definitions of insurance classes (life, non-life);
• definitions of long tailed risks and low frequency risks;
• confidence levels; and
• assumptions concerning policy holders use of options.
13.17 Scenario analysis may be a central part of <strong>the</strong> Solvency II framework.
Stress tests may, <strong>the</strong>refore, be needed <strong>to</strong> calculate <strong>the</strong> impact of a set
of single events or a combination of single events. The PFS for life
insurance undertakings included stress tests of interest rate risk, credit
risk, market risk, underwriting risk and lapse risk. Stress tests and/or
scenario analysis <strong>to</strong> be used in <strong>the</strong> QIS might include o<strong>the</strong>r risks such
as expense risk, ALM risk etc. as <strong>the</strong>y will be closely related <strong>to</strong> <strong>the</strong> draft
Framework Directive.
Sample sizes
13.18 Samples should be sufficiently large and varied (size and type of
business of undertakings participating) <strong>to</strong> give a fairly accurate picture
of <strong>the</strong> quantitative impact of <strong>the</strong> Solvency II proposals in <strong>the</strong> individual
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