The European Insurance and Occupational Pensions Authority (EIOPA), has published its second and final set of advice to the European Commission on the Solvency Capital Requirement (SCR) formula under the Solvency 2 Delegated Regulation. Highlights include:
- EIOPA recommends further simplifications and improvements to the calculation of capital requirements, including for fire risk and mass accidents catastrophes.
- With regard to interest rate risk, EIOPA recommends new calibrations that take negative interest rates into account. It commented that the current approach is not effective when interest rates are low and does not cater for negative interest rates.
EIOPA has also published a FAQs on the review of the SCR standard formula and a letter to the Director-General of the European Commission.
Going forward EIOPA suggests that element of the risk margin should be assessed as part of the overall review of Solvency 2 which is due in 2021.