Solvency Capital Requirement - General Provisions General Provisions for the Calculation of the SCR
Application provision
1.1 Unless otherwise stated, this Part applies to:
- (1) a UK Solvency II firm;
- (2) in accordance with Insurance General Application 3, the Society, as modified by 6 to 8; and
- (3) in accordance with Insurance General Application 3, managing agents, as modified by 8.
3.1
01/01/2016
A firm must calculate its SCR either in accordance with the standard formula or using an internal model for which internal model approval has been granted.
3.2
01/01/2016
3.3
01/01/2016
- (1) must be calibrated to ensure that all quantifiable risks to which the firm is exposed are taken into account, including at least the non-life underwriting risk, life underwriting risk, health underwriting risk, market risk, credit risk, and operational risk;
- (2) must cover existing business, as well as the new business expected to be written over the following 12 months; and
- (3) with respect to existing business, must cover only unexpected losses.
3.4
01/01/2016
A firm’s SCR must correspond to the value-at-risk of its basic own funds subject to a confidence level of 99.5% over a one-year period.
3.5
01/01/2016
When calculating the SCR, firms must take account of the effect of risk-mitigation techniques, provided that credit risk and other risks arising from the use of risk-mitigation techniques are properly reflected in the SCR.
3.6
01/01/2016
Notwithstanding 3.2 to 3.5, a firm’s SCR shall not cover the risk of loss of basic own funds resulting from changes to the volatility adjustment.