Hello- need a quick clarification. When we say that MCR and SCR both must be held, say MCR= 20 million and SCR = 100 million, in reality we are holding only 100 million. MCR is defined only for determining supervisory intervention level as regulator will revoke authorization if SCR is below MCR. Insurer does not hold 100+ 20 million. Is my understanding correct?
Yes that is correct, except the phrase 'as regulator will revoke authorisation if SCR is below MCR'. The SCR will never be smaller than the MCR. I think you mean '... if available capital (ie own funds) falls below the MCR'.
Can someone please share few examples of currency risk and concentration risk per market risk module for SCR?
Currency risk: impact on assets and/or liabilities of a foreign currency depreciating / appreciating against the domestic currency Concentration risk: relates to exposure to a single counterparty (broadly determined as a defined % of the excess of that exposure over a defined 'acceptable' level) [Standard formula test details that are not covered in the Core Reading would not be expected for the SA2 exam, but if you are interested for wider reasons then would suggest that you refer to the relevant EU / EIOPA publications - which I think in this case would be Commission Delegated Regulation (EU) 2015/35 ]
