What are technical provisions Solvency II?

Solvency II requires the technical provisions to be a “best estimate” of the current liabilities relating to insurance contracts plus a risk margin. This section covers the claims provision and the premium provision that together make up the best estimate.

What is Solvency II matching adjustment?

Solvency II’s Matching Adjustment (MA) provisions give insurers relief for holding certain long-term assets which match the cash flows of a designated portfolio of life or annuity insurance and reinsurance obligations.

What is minimum capital requirement Solvency II?

Under Solvency II, capital requirements are determined on the basis of a 99.5% value-at-risk measure over one year, meaning that enough capital must be held to cover the market-consistent losses that may occur over the next year with a confidence level of 99.5%, resulting from changes in market values of assets held by …

Who is subject to Solvency II?

Jurisdiction Solvency II will apply to most insurers and reinsurers with their head office in the European Union (EU), including mutuals, and companies in run-off unless their annual premium income is less than €5 million.

What is the minimum solvency ratio?

As per the IRDAI’s mandate, the minimum solvency ratio insurance companies must maintain is 1.5 to lower risks. In terms of solvency margin, the required value is 150%. The solvency margin is the extra capital the companies must hold over and above the claim amounts they are likely to incur.

What is premium provision in Solvency II?

The premium provision is the discounted best estimate of all future cash flows (claims payments, expenses and future premiums) relating to future exposure arising from policies that the (re)insurer is obligated to at the valuation date.

Does Solvency II still apply in the UK?

The UK’s insurance sector has been subject to the Solvency II rules since 2016 after they were introduced to harmonise insurance regulation across the EU.

How is volatility adjustment calculated?

A Risk Management approach for the Volatility Adjustment The Best Estimate of the Liabilities are calculated by discounting future cash-flows using the risk-free rate (RfR).

How is solvency capital requirement calculated?

When calculating the Solvency Capital Requirement, insurance and reinsurance undertakings shall take account of the effect of risk-mitigation techniques, provided that credit risk and other risks arising from the use of such techniques are properly reflected in the Solvency Capital Requirement.