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SCR, technical reserves under Solvency II

Discussion in 'SA3' started by indexo, Apr 25, 2021.

  1. indexo

    indexo Member

    Hi,
    Under Solvency II,
    1. Is technical reserves = technical provision (BE+risk margin) + SCR?
    2. Is technical reserves + other liabilities = total liabilities?
    3. Is total assets - total liabilities (based on definition above) = free reserves?
     
    Last edited by a moderator: Apr 25, 2021
    indexo, Apr 25, 2021
    #1
  2. Ian Senator

    Ian Senator ActEd Tutor Staff Member

    See the diagram on page 14 of Chapter 4, plus the supporting text over the following few pages.
    The easiest way to think of it is that technical reserves (BE+risk margin) plus free reserves = total reserves = total assets.
    And you need at least a certain amount of free reserves (certainly at the least the SCR/MCR, maybe more).
     
    Ian Senator, Apr 26, 2021
    #2
  3. indexo

    indexo Member

    On page 4 of Solution of X4 Assignment, on first two points, the different calculations for MCR/SCR will impact technical reserves - is it because risk margin calculation is a subset of SCR?

    Also, are you saying that technical reserves = technical provision?
     
    Last edited by a moderator: Apr 26, 2021
    indexo, Apr 26, 2021
    #3
  4. Ian Senator

    Ian Senator ActEd Tutor Staff Member

    No, the way we calculate reserves are quite different depending on the purpose. Explained further down that page of the solution.

    Tech reserves vs technical provisions - see Glossary p2 para 3.
     
    Ian Senator, Apr 26, 2021
    #4
  5. indexo

    indexo Member

    I still don't quite understand page 2 of Glossary - it doesn't really explain the differences between technical reserves vs. provisions.
    Where can I find the definition of technical reserves then?
    In the glossary, I see that technical provision = BE + risk margin.
     
    Last edited by a moderator: Apr 26, 2021
    indexo, Apr 26, 2021
    #5
  6. Ian Senator

    Ian Senator ActEd Tutor Staff Member

    The Glossary is saying that many people use 'provisions' and 'reserves' interchangeably. But that some people take reserves to mean something a bit more 'just in case'. If you use either, just make it clear to the examiners what you're referring to and you'll be ok. Most of the time, it's the components of the reserves (eg expired, unexpired, IBNR, etc) that are of more interest to us as actuaries.
     
    Ian Senator, Apr 26, 2021
    #6
    CapitalActuary likes this.

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