Sandra Nilsson: Effekten av den föreslagna riskmarginalen i 2020-översynen

Abstract.

  The Solvency 2-regulatory framework is subject to a review process, known as the 2020 review, which has resulted in several proposed changes to the framework. One of the proposed changes relates to the calculation method of the risk margin in the technical provisions, which will be investigated in this report. The risk margin uses a cost-of-capital approach where the calculation is based on future solvency capital requirements. The definition of the risk margin in the Solvency 2-regulatory framework has received criticism in the insurance industry. In an article by Pelkiewicz, the Institute and Faculty of Actuaries[1], expressed concern that the risk margin is to volatile and conservative. This ultimately resulted in EIOPA proposing an alternative approach to calculating future solvency capital requirements, taking into account the dependence of risk over time, a factor max(λt, floor). Additionally, a simplification method for calculating the risk margin is also discussed, where the solvency capital requirements is phased out at the same rate as the best estimate. The non-life insurance companies studied in this paper have been assessed to be suitable for using the standard formula. We compare the proposed method in the 2020-review and the simplified method with the existing method. We show that the proposed method have a reducing eect on the risk margin and the eect is larger on long-tail business. We also show that the simplified method gives a lower risk margin for these non-life insurance companies.