With those derived from their own data, most commonly the Solvency II line of business (“LoB”) specific volatility parameters for premium risk and reserve risk.
Under Solvency II in the EU and the UK, (re)insurance undertakings are required to hold capital at least equal to the SCR. Most non-life undertakings across the EU and UK use the SF to calculate the SCR. A small number of undertakings have invested in a supervisor-approved (partial) internal model (“IM”), which allows full freedom to design and parameterise a complete solution to calculate the SCR. A small number of undertakings have invested in a supervisor-approved (partial) internal model (“IM”), which allows full freedom to design and parameterise a complete solution to calculate the SCR.
For undertakings using the SF for which elements of the SCR have been internally assessed as being poorly aligned with the risk profile, and for which an IM would be too onerous, applying for USPs is a viable solution.
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