Legal regulation of insurance companies' solvency in the EU: Solvency II

On the Solvency of Insurance Companies

Solvency II solvency capital requirement for life insurance companies based on expected shortfall

This paper examines the consequences for a life annuity insurance company if the solvency II solvency capital requirements (SCR) are calibrated based on expected shortfall (ES) instead of value-at-risk (VaR). We focus on the risk modules of the SCRs for the three risk classes equity risk, interest rate risk and longevity risk. The stress scenarios are determined using the calibration method pro...

Solvency II

The insurance industry needs to be regulated to protect policyholders. This is the main objective of the Solvency II directive – the new insurance regulations for the European Economic Area. In short, it requires insurance companies to act responsibly with the money they have been entrusted with. It is estimated that implementing Solvency II will cost 2-3 billion Euro. It has the potential to c...

Solvency II for property-casualty insurers (II)

be geared to modern requirements. Unlike the present solvency regime, Solvency II is designed to reflect a prospective and risk-oriented economic view. It will be based on a total balance sheet approach and harmonised with accounting rules and regulations. Assets and liabilities will consistently be recognised at market values. In principle, IFRS provisions can be used as a basis for valuing th...

The fundamental definition of the Solvency Capital Requirement in Solvency II

It is essential for insurance regulation to have a clear picture of the risk measures that are used. We compare different mathematical interpretations of the Solvency Capital Requirement (SCR) definition that can be found in the literature. We introduce a mathematical modeling framework that allows us to make a mathematically rigorous comparison. The paper shows similarities, differences, and p...