• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Pillar 2 ICA, Internal Model and ORSA

E

eroche1

Member
Basically which of these include projections of new business?

Based on some series x questions NB is taken into account for setting expense assumptions and shocks but is future new business strain also projected for Pillar 2 ICA?

The internal model that is used to calculate the SCR does not include new business I assume. Is this correct?

Projections for the ORSA should include new business so in looking at the SCR and MCR over the business planning horizon the ORSA is more similar to the Pillar 2 ICA than to the internal model, at lease where SCR projections are concerned. Is this statement correct?
 
Ok I am not so sure about the ICA including new business can anyone confirm whether it does or not? Thanks.
 
I believe the key concept here that needs to be clarified is new business. There is both the new business written in the past year prior to the valuation date that is included in the EV, as well as future expected new business (included in e.g. appraisal value).

I think new business written during the past year prior to the valuation date is taken into account in Solvency I Pillar 1 and Solvency II Pillar 1. This is because I understand the LTICR, RCR, and RCM under Solvency I Pillar I and MCR/SCR/Internal model under Solvency II Pillar I to be capital that is required in terms of stress events within one year.

I think future new business can be included (at the discretion of the insurer and approval of the regulator) for capital requirements that are projected for the next say 3-5 years. This will include both Solvency I Pillar II ICA (99.5% over one year or that which is equivalent over longer periods, typically 3-5 years) as well as Solvency II Pillar II ORSA (regulatory requirement to assess sufficiency of capital to meet MCR/SCR over 3-5 year time horizon).
 
Back
Top