Consultation Paper No. 49 - CEIOPS-CP-49/09, 2
July 2009
Draft CEIOPS
Advice for Level 2 Implementing Measures on Solvency II:
Standard formula SCR - Article 109 c, Life
underwriting risk
3.6 Revision risk
3.6.1. Explanatory text
Introduction
3.89. In the context of the life underwriting
risk module, revision risk is intended to
capture the risk of adverse variation of an annuity’s amount, as a
result of an unanticipated revision of the claims process.
3.90. This risk should be applied only to:
• Annuities
arising from non-life claims (including accident insurance, but
excluding workers compensation) where the amount of the annuity
may be revised during the next year.
• Benefits that can be
approximated by a life annuity arising from non-life claims
(including accident insurance, but excluding workers compensation)
where the amount of the annuity may be revised during the next
year.
Revision risk in QIS4
3.91. The QIS4 approach to the SCR standard
formula included a revision risk sub-module in the life
underwriting risk module (section TS.XI.G of the QIS4 Technical
Specifications (MARKT/2505/08)).
The calculation of the capital requirement for
revision risk was a scenario based stress.
The scenario
tested was an increase of 3% in the annual amount payable for
annuities exposed to revision risk.
3.92. QIS4 feedback
indicated that the application of the revision risk module was not
universally clear in some member states.
This has been
addressed by expanding on the application of this sub-module in
the introduction
above.
3.93. With regard to the
calibration of the revision risk stress, one undertaking stated
that the shock for revision risk is too low.
Calculation of the capital requirement
3.94. QIS4 participants did not raise any
issues with the design and structure of this module and CEIOPS has
therefore concluded that the approach adopted in QIS4 is
appropriate.
3.95. The capital requirement should therefore
be calculated as the change in net asset value (assets minus
liabilities) following an increase of x% in the annual amount
payable for annuities exposed to revision risk.
Calibration of revision risk stress
3.96. The basis for the QIS4 calibration of the
revision risk stress is described in the CEIOPS paper “QIS3
Calibration of underwriting risk, market risk and MCR”.
This paper is available on the CEIOPS website.
3.97. Only
one participant in QIS4 commented on the calibration of this
module.
CEIOPS has therefore concluded that the calibration
adopted in QIS4 is appropriate for the majority of (re)insurance
undertakings.
3.98. CEIOPS therefore proposes that the
revision risk is calculated assuming an increase of 3% in the
annual amount payable for annuities exposed to revision risk.
3.6.2. CEIOPS’ advice
Revision risk
3.99. The calculation of the capital
requirement for revision risk shall be a scenario based stress.
3.100. The capital requirement shall be calculated as the change
in net asset value (assets minus liabilities) following an
increase of 3% in the annual amount payable for annuities exposed
to revision risk.
Life Underwriting
Risk:
Introduction to Solvency ii Life Underwriting Risk
Solvency ii Mortality Risk
Solvency ii Longevity Risk
Solvency ii Disability Morbidity Risk
Solvency ii Life Expense Risk
Solvency ii Life Revision Risk
Solvency ii Lapse Risk
Solvency ii Life Catastrophe Risk
  
|
