The Solvency ii
Directive
(31)
The calculation of technical provisions should be consistent with
the valuation of assets and other liabilities, market consistent and
in line with international developments in
accounting and supervision.
(32) The value of technical provisions should therefore
correspond to the amount an insurance or reinsurance undertaking
would have to pay if it transferred its
contractual rights and obligations immediately to another
undertaking.
Consequently,
the value of technical provisions should correspond to the amount
another insurance or reinsurance
undertaking (reference undertaking) would be expected to require to
take over and meet the underlying insurance and
reinsurance obligations.
The
amount of technical provisions should reflect the characteristics of
the underlying insurance portfolio.
Undertaking-specific information should
therefore only be used in their calculation insofar as that
information enables insurance and reinsurance undertakings to better reflect the characteristics of the
underlying insurance portfolio, such as information regarding claims
management and expenses.
(32a) The assumptions made about the reference
undertaking assumed to take over and meet the underlying insurance
and reinsurance obligations should be
harmonised throughout the Community.
In
particular, the assumptions made about the reference undertaking
that determine whether or not, and if so to what extent, diversification effects should be taken into
account in the calculation of the risk
margin should be analysed as part of the impact assessment of
implementing measures and should then be harmonised at Community
level.
(32b) For the purpose of calculating technical
provisions reasonable interpolations and extrapolations from
directly observable market values may be applied.
(33) It is
necessary that the expected present value of insurance liabilities
is calculated on the basis of current and
credible information and realistic assumptions, taking
account of financial guarantees and options in insurance or
reinsurance contracts, to deliver an economic valuation of insurance
or reinsurance obligations.
The
use of effective and harmonised actuarial
methodologies should be required.
(34) In order to
reflect the specific situation of small and
medium sized undertakings, simplified
approaches to the calculation of technical provisions
should be provided for.
(35) The supervisory regime should
provide for a risk-sensitive requirement,
which is based on a prospective calculation to ensure accurate and timely intervention by supervisory
authorities (the Solvency Capital Requirement), and a minimum
level of security below which the amount of financial resources
should not fall (the Minimum Capital
Requirement).
Both capital requirements should be harmonised
throughout the Community in order to achieve a uniform level
of protection for policyholders.
For
the good functioning of the Solvency II regime, there should be an
adequate ladder of intervention
between the Minimum Capital Requirement and the Solvency Capital
Requirement.
(35a) In order to mitigate
undue potential pro-cyclical effects of the financial system
and avoid that insurance and reinsurance undertakings are unduly forced to raise additional capital or sell
their investments as a result of unsustained adverse movements in
financial markets, the market risk
module of the standard formula for the Solvency Capital
Requirement should include a symmetric adjustment mechanism with
respect to changes in the level of equity prices.
In
addition, in the event of exceptional falls in
financial markets, and where that symmetric adjustment
mechanism is not sufficient to enable insurance and reinsurance
undertakings to comply with their Solvency Capital Requirement,
provision should be made to allow supervisory
authorities to extend the time period within which
insurance and reinsurance undertakings have to re-establish the level of eligible own funds covering
the Solvency Capital Requirement.
(36) The
Solvency Capital Requirement should reflect a level of eligible own
funds that enables insurance and reinsurance undertakings to absorb significant losses and that gives
reasonable assurance to
policyholders and beneficiaries that payments will be made as they
fall due.
(36a) In order to ensure that insurance and
reinsurance undertakings hold eligible own funds that cover the
Solvency Capital Requirement on an on-going basis, taking into
account any changes in their risk profile, those undertakings should
calculate the Solvency Capital Requirement at
least once a year, monitor it continuously and recalculate it whenever the risk profile alters
significantly.
(37) In order to promote good risk
management, and align regulatory capital requirements with industry
practices, the Solvency Capital Requirement
should be determined as the economic capital to be held by insurance
and reinsurance undertakings in order to ensure that ruin occurs
no more often than once in every 200 cases
or, alternatively, that those undertakings will still be
in a position, with a probability of at least
99,5%, to meet their obligations to policyholders and
beneficiaries over the forthcoming 12 months.
That
economic capital should be calculated on the basis of the true risk
profile of those undertakings, taking account of
the impact of possible risk mitigation techniques, as well as
diversification effects.
(38) Provision should be made
to lay down a standard formula for the
calculation of the Solvency Capital Requirement, to enable all
insurance and reinsurance undertakings to assess their economic
capital.
For
the structure of the standard formula, a modular
approach should be adopted, which means that the individual exposure to each risk category should
be assessed in a first step and then aggregated in a second step.
Where
the use of undertaking-specific parameters allows for the true
underwriting risk profile of the undertaking to be better reflected,
this should be allowed, provided such parameters are derived using a
standardised methodology.
(39) In order to reflect the
specific situation of small and medium sized
undertakings, simplified approaches
to the calculation of the Solvency Capital Requirement in
accordance with the standard formula should be provided
for.
(40)---
Return to Index
Solvency ii Introduction (1) to (10)
Solvency ii Introduction (11) to (20)
Solvency ii Introduction (21) to (30)
Solvency ii Introduction (31) to (40)
Solvency ii Introduction (41) to (50)
Solvency ii Introduction (51) to (60)
Solvency ii Introduction (61) to (70)
Solvency ii Introduction (71) to (80)
Solvency ii Introduction (81) to (95)
Solvency ii Articles 1 to 10
Solvency ii Articles 11 to 20
Solvency ii Articles 21 to 30
Solvency ii Articles 31 to 39
Solvency ii Articles 40 to 49
Solvency ii Articles 50 to 62
Solvency ii Articles 63 to 71
Solvency ii Articles 72 to 85
Solvency ii Articles 86 to 99
Solvency ii Articles 100 to 125
Solvency ii Articles 126 to 142
Solvency ii Articles 143 to 159
Solvency ii Articles 160 to 173
Solvency ii Articles 174 to 203
Solvency ii Articles 204 to 215
Solvency ii Articles 216 to 233
Solvency ii Articles 234 to
262
Solvency ii Articles 263 to 298
Solvency ii Articles 300 to 313
Solvency ii ANNEX 1 to 3
Solvency ii ANNEX 4 to 5
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