timed out BattleActs100

Solvency II Capital Requirements

myID_+ priorDate_+ record_+ WET_+ fadeFactor_

Determine the action of the regulator based on the Solvency II quantitative capital requirements. (Modeled on 2017.Spring #20)

  current score:
0.000

ACTION (n/i/s)
(none / intervene / stop operations)
    SCR
    risk margin
    free surplus (enter 0 if ≤ 0)
free surplus ?
SCR ?
MCR 250
risk margin ?
best est. liabs. 150
loss payments expected to occur for this many years 3
percentile VaR
95.0% 950
99.0% 995
99.5% 997
IFRS assets 2000

risk-free rate 2%
iliquidity premium 1%
cost-of-capital above risk-free rate
(R - i)
6%
* Capital is held until the end of the year.
* Loss payments are made mid-year. (not relevant here because you don't have to calculate best. est. liabs.)
* Assume SCR payments are constant for all future years.

SCR

Choose 99.5th percentile for SCR (may not be the same across all years, but it is in this problem)

Assets

SCR assets required
=    (best est. liabs.)    +    ( risk margin ) +    SCR

MCR assets required
=    (best est. liabs.)    +    ( risk margin ) +    MCR

ACTION

no action:
SCR assets required
≤    IFRS assets avail.

intervene:
MCR assets required
≤    IFRS assets avail.
<    SCR assets required

stop operations:
    IFRS assets avail.
≤    MCR assets required

Solution:
ACTION (n/i/s)
    SCR
    risk margin
    free surplus 123456
IFRS assets avail.
SCR assets required
MCR assets required
discount rate (cost-of-capital) rfr + illiq
discounted cost-of-capital (year 1)
discounted cost-of-capital (year 2)
discounted cost-of-capital (year 3)
discounted cost-of-capital (year 4)