Question ID: 1008
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Article: 227
Status: Final
Date of submission: 30 Jul 2018
Question
This question concerns the treatment of the risk margin in the context of an internal model.
In the case of the standard formula, the Solvency II regulation explicitly requires that the risk margin remains constant when calculating the SCR.
For internal models, on the other hand, there seem no explicit regulatory requirements.
Yet, are there supervisory expectations as to the treatment of the risk margin in the context of an internal model (for instance: Should it remain constant? If it is modelled dynamically, should certain aspects certainly be covered by the model?)
EIOPA answer
The probability distribution forecast of an internal model should take into account changes to the risk margin of technical provisions where they are material.