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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