Best estimate liability and reserves under Sovlency II

Discussion in 'SA1' started by happylovelife, Mar 23, 2018.

  1. happylovelife

    happylovelife Member

    Hi Members and Tutors,

    I need some help...
    I’m confused about the relationship between BEL and reserves under solvency II.
    Does BEL include all cashflows such as changing in reserves and changing in capital?
    That changing in reserves component includes all type of reserves (e.g, IBNR, outstanding claims, policy reserves etc.), is that correct?
    I heard some people are referring reserves as the Techinal provision. That reserve means different thing as the reserves I mentioned above ?

    Thank you so much for your help.
  2. Sarah Byrne

    Sarah Byrne ActEd Tutor Staff Member

    Hi Kylie

    The diagram on p2 of Chapter 13 should help show what we need to consider under Solvency II. The BEL is a cashflow projection and presents the present value of the expected future cashflows (claims + expenses - premiums etc). It doesn't allow for changes in the BEL itself.

    The technical provisions (as in the diagram) are the BEL + risk margin (so perhaps what you are thinking of as 'reserves'?).

    The risk margin represents the cost of the capital required to be held given the liabilities.

    The technical provisions include allowance for incurred but not reported claims and also outstanding claims.

    Hope this helps,
  3. Rolf Johansen

    Rolf Johansen Member

    May I ask where to find the "official" link for the one and only SolvencyII document if any. Is there one doc or a collection of several?
  4. Sarah Byrne

    Sarah Byrne ActEd Tutor Staff Member

    For the SA1 exam you will only be expected to know the Solvency II material in Chapters 12 and 13 of the Course Notes.

    As given in Ch12, there is material on the PRA website:

    You could also look directly at the EIOPA website:

    There are many 'official' documents associated with Solvency II - these links should give you access to everything you could want to know (and probably far more besides!) :)
    Rolf Johansen likes this.
  5. Rolf Johansen

    Rolf Johansen Member

    Thank you for your time and effort. SolvencyII is being embedded in the Actuarial education and is regarded as important in my case, so I have to do some "digging". The documentation seems a little fragmented from my beginner's view, so nice to have it in order.

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