Q&A

Question

The question is related to the calculation of Risk Margin under SII regulation in terms of future SCR for the Reference Undertaking in case of Non Life Business

Background of the question

Calculation of future volume measures for reserve risk for the transferred business. The volume measures for the future SCR(t) has to consider also the claims reserve linked to the claims generated by the earned premium during year 1. As an example: we are calculating Risk Margin as FY 2020, for the calculation of SCR(1) for FY 2021, claims reserve for Accident year 2021 (generated by the earned premium during 2021 for the transferred business as a closed portfolio) has to be considered in volume measures for reserve risk?

EIOPA answer

The projection of the future SCR for the Risk Margin should be consistent with the assumptions underlying the rest of the Technical Provisions, in particular the amount of future premiums within the contract boundary. 

If the best estimate of the earned premium during 2021 is within the contract boundary as at FY2020, then the calculation of SCR(1) for FY2021 should include the claims reserve for Accident year 2021 (generated by the earned premium during 2021 for the transferred business as a closed portfolio).