Chapter 2 of the notes says that SII capital requirements for equity release products are stringent. What are these requirements?
Hi: the Solvency II capital requirements means the SCR (Solvency Capital Requirement). This is a risk-based (Value-at-Risk) assessment, so the reason that it is relatively high for equity release products is that there are lots of significant risks that can impact the value of such products/assets. The next part of Chapter 2 sets out what those risks are: property market risk, longevity/mortality risk, and possibly also persistency, interest rate and expense risks (depending on the specific product design). The greater the overall risks, the greater the risk-based capital requirement, ie the higher the SCR.