Hi In Q 1 iii) if the question also asked us to assess the impact of this change on SCR of the Operational risk as well.So could u pls help understand as to how the magnitude of the SCR for Operational risk would change?
The Core Reading tells us that the SCR standard formula op risk module is based on %s of 'earned premiums and technical provisions'. So anything that will impact those items will change the SCR. In the given scenario we wouldn't be able to say for sure what would happen to the op risk component as there will be competing impacts. Premiums and provisions would be lower due to high deaths and low new business, but on the other hand provisions will be higher due to the lower interest rates.
