In pricing when the notes say for each model point cash flows will be projected, allowing for reserving and solvency capital requirements using a set of assumptions. My understanding is that solvency capital requirement will not appear in the income statement but for each premium a net profit/loss will be calculated and added to assets and liabilities are deducted from assets and the free assets are calculated and this compared to solvency capital requirement to check adequacy of premium rates. Am I right? Please advise.
