Hi, I have some questions about CH4, hope someone can help me 1. letter of credit (page 44) : it states "if an LoC not replaced annually, Lloyd's would expect the member to lodge other asset in FAL . One of the criteria for LoC is it need to be available throughout a specified period , usually four years - evengreen. then why LoC need to be replaced annually ? 2. about the calculation of LLoyd's SCR (page 45) : it suggested that MWSCR includes CSCR, VaR calcuation is such that 1 in 200 event for the whole market is different from the 1 in 200 for central asset. I am unable to follow the logic here, VaR calculation used to calculate the stress , therefore, like capital we derived, it is the difference between 1 in 200 and the mean (business plan ) . thus how much it is likely to deviate from the mean . and why here is calculating the 1 in 200 event for whole market different to 1 in 200 central asset?
1. I read it to mean that they check annually, and if one LoC drops out (eg after the four years), then it should be replaced. I may be wrong though. 2. The CSCR only considers losses to the Central Fund, whereas the MWSCR considers losses to both the Central Fund and the members - so the MWSCR would be larger.
