Solvency II - Lloyd's

For every type of catastrophe risk, the risk mitigating effect of the syndicate’s specific reinsurance contracts
must be determined. This calculation is prospective and must be based on the reinsurance program of the
next reporting year as described in the reinsurance forms for facultative covers (QMC710/720) and outgoing
reinsurance program in the next reporting year (QMC730).
2.35 QMC529: Solvency Capital Requirement – Operational risk
Purpose of form: This form reports the capital requirement for the operational risk component of the SCR
where this has been calculated using the standard formula.
This form is required with respect to the prospective reporting year, for example, when reporting for the year
end 2014, the reporting year to be indicated on the form should be 2015 as the SCR being reported would
relate to business due to be written in 2015. It will be required on an annual basis.
This form should only be completed where the syndicate is using the standard formula to calculate the
operational risk component of the SCR.
Technical provisions reported in this form should not include the risk margin, and should be before deduction
of recoverables from reinsurance contracts and special purpose vehicles.
The earned premium is the written premium for a policy which is spread over the term of the policy in order to
appropriately reflect the spread of risk over the term of the policy. This may be determined through a simple
pro-rating of the written premium over the term of the policy on a time apportionment basis, but if there is
marked unevenness of the incidence of risk over the period, then an alternative basis better reflecting this
pattern should be adopted.
2.36 QMC710: Facultative covers: non-life (10 important risks in term of reinsured
exposure)
Purpose of form: This form reports, for each line of business, the individual and market-wide risk profile of the
risks that are irregular in terms of nature and size.
This form is required for all years combined and will be required on an annual basis.
This form should be completed by the syndicate for each line of business for which facultative reinsurance is
used. There should be one separate form completed for each line of business. For each line of business, a
selection should be made of the 10 most important risks in terms of reinsured exposure.
Risk identification code: This is a unique identifying number assigned by the syndicate that identifies the
risk. This code cannot be reused for other risks and remains unchanged for subsequent annual returns. The
syndicate should use the risk identification codes provided by Lloyd’s.
Facultative reinsurance placement identification code: Each facultative reinsurance placement should
be assigned a sequence number which is unique for the risk. The facultative reinsurance placement
identification code is syndicate specific.
Insured (policy number): This is the name of the company to whom the risk relates. Where the insured is a
private person only the policy number should be mentioned.
Currency: This is the currency used while placing the facultative cover and it should be reported in form of
the ISO code, for example, USD, GBP etc.
Amount reinsured on a facultative basis: This is the part of the sum insured, estimated maximum loss
(EML) or probable maximum loss (PML) amount which is reinsured on a facultative basis. Normally this
amount reflects the maximum liability (100%) for the facultative reinsurers.
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