1. What is the difference between projection and superpisory basis in Embedded Value and where are they applied in the calculation?
2. How does PVIF compare with SII BEL? If PVIF is based on best-estimate assumptions, would it be the same as BEL? I read somewhere if best-estimate assumptions are used then PVIF is zero as PVIF is release of prudency in reserves and with best-estimate there is no prudency left. But I am not able to understand this logically. Example would useful.
Also, what is being said here in the course notes:
"Under Solvency II, the ‘required capital’ component of the EV calculation would include the
Solvency (or Minimum) Capital Requirement (SCR or MCR). It could also include the risk margin,
unless the release of the risk margin is instead allowed for in the PVIF – as mentioned in the final
bullet point above."
Is it saying that RC = SCR if release of margins is included in PVIF? and if not, then RC = SCR + risk margin?
Last edited: Apr 14, 2024