Equity release - capital requirements

Discussion in 'SA2' started by FloWesh, Jul 25, 2017.

  1. FloWesh

    FloWesh Member

    Chapter 2 of the notes says that SII capital requirements for equity release products are stringent.
    What are these requirements?
     
  2. Lindsay Smitherman

    Lindsay Smitherman ActEd Tutor Staff Member

    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.
     
  3. FloWesh

    FloWesh Member

    Makes perfect sense. Thanks.
     

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