EIOPA Submits Second and Final Advice for Review of SCR Calculation
EIOPA submitted its second and final set of Advice to EC on the standard formula for the Solvency Capital Requirement (SCR) under Solvency II. This final Advice follows an EIOPA consultation that came out in November 2017 and ended on January 05, 2018. EIOPA had submitted the first set of Advice to EC in October 2017.
The Advice is accompanied by a full impact assessment, which considers the overall impact of both sets of Advice and provides an assessment of the components of this second Advice. EIOPA recommends:
- Further simplifications and improvements to the calculation of capital requirements
- Mixture of revised calibrations, simplifications and, where needed, proposals to achieve greater supervisory convergence
- Further simplification of calculations for natural, man-made, and health catastrophes, particularly fire risk and mass accident, along with simplification of the treatment of look-through to underlying investments
- Regarding the treatment of unrated debt and unlisted equity—objective criteria, such as financial ratios, when these important asset classes can be given the same treatment as rated debt and listed equity
- New calibrations that take recent evidence, such as negative rates, into account, in the area of calculation of interest rate risk
EC had asked EIOPA to provide technical advice as part of its review of the SCR. EC had expressed its intention to review methods, assumptions, and standard parameters used when calculating the SCR with the standard formula. This review is to be performed before December 2018.
Related Links
Keywords: Europe, EU, Insurance, Solvency II, SCR Formula, Advice, EC, EIOPA
Featured Experts
Paul McCarney
Insurance product strategist; insurance domain expert; extensive experience developing risk assessment frameworks for insurers
Brian Robinson
Actuary; risk management specialist; corporate and capital modelling expert
Previous Article
SEC Proposes Rule on Risk Mitigation Techniques for Uncleared SBSRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards