What are long-term guarantee measures Solvency II?
Solvency II long-term guarantee measures are aimed at reducing the effect of artificial volatility for long-term insurance products. In this article, the effectiveness of long-term guarantee measures, in particular the volatility adjustment (VA), will be analysed.
What is the volatility adjustment under Solvency II?
The volatility adjustment is a measure to ensure the appropriate treatment of insurance products with long-term guarantees under Solvency II. (Re)insurers are allowed to adjust the RFR to mitigate the effect of short-term volatility of bond spreads on their solvency position.
What is long-term guarantees?
The long-term guarantee measures are the extrapolation of risk-free interest rates, the matching adjustment, the volatility adjustment, the extension of the recovery period in case of non-compliance with the Solvency Capital Requirement, the transitional measure on the risk-free interest rates, and the transitional …
What is the minimum capital requirement for insurance companies?
If this application is made for the business of Life Insurance, General Insurance, or Health Insurance, there must be documentary evidence proving that the paid-up capital of the business is at least Rs. 100 crore.
Does Solvency II apply after Brexit?
While the core of Solvency II looks set to remain in place following the UK’s exit from the EU, there’s scope for the Prudential Regulation Authority (PRA) to improve competitiveness by bringing capital requirements more into line with the distinctive nature of the UK market.
What is a UK Solvency II Firm?
2.1. A UK Solvency II firm means a firm: (1) that satisfies the conditions set out in 2.2, or. (2) whose Part 4A permission includes a requirement that it comply with the Solvency II Firms Sector of the PRA Rulebook.
What to know about LTGA Solvency II preparatory phase valuation?
Topic LTGA Solvency II Preparatory Phase Valuation –Assets and other liabilities –V.1.1. Valuation approach (continued) such as the definitions of assets and liabilities as well as the recognition and derecognition criteria, are applicable, unless otherwise stated.
How are contingent liabilities defined in Solvency 2?
V.9. “Contingent liabilities: For Solvency II purposes, contingent liabilities have to be recognised as liabilities. The valuation of the liability follows the measurement as required in IAS 37 Provisions, contingent liabilities and contingent assets,with the use of the basic risk-free interest rate term structure.”
When to use IFRSs for Solvency 2 valuation?
If those standards allow for more than one valuation method, only valuation methods that are consistent with Article 75 of Directive 2009/138/EC shallbe used. In most cases those international accounting standards, herein referred to as “IFRSs”, are considered to provide a valuation consistent with principles of Solvency II.
How does Solvency II affect the insurance industry?
The Solvency II Directive is a new regulatory framework for the European insurance industry that adopts a more dynamic risk-based approach and implements a nonzero failure regime. The Directive fundamentally alters the way European insurers measure risk and deploy risk management practices.