Hi, currently looking at the risk margin, I was googling it and came across some articles that critise it for being far too high, especially for long term products such as annuities and whole life.
I can't see how this is, I've tried looking for an example but from my understanding of it, the risk margin is calculated using the cost of capital approach, so should its relationship to the SCR not be (roughly) 0.06 of it?
The article I was reading was from insurance Europe and cited some risk margins being 50% of the SCR? It explicitly mentioned the Risk margin being extremely high for funeral insureanc??
Could you shed light on the relationship between the SCR and the Risk margin and how the risk margin could climb so high?
I presume I'm not understanding something fundamental about either the calculation of the SCR or the Risk margin.
Thanks
Peter
Last edited by a moderator: Aug 20, 2018