Regulator Action Under Solvency II
For this new topic, is it possible for surplus will be negative? or do we cap it at 0?
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For this new topic, is it possible for surplus will be negative? or do we cap it at 0?
Comments
If you have a negative surplus it means your Technical provisions + SCR < 0. This will probably trigger regulatory action similar to how going below 150% on your MCT will trigger a review. So yes I think you can go negative
when calcing MCR and SCR asset req why dont we consider the surplus? Its available to be used so why not add it
Although surplus is available to be used, it is not directly added because these requirements aim to ensure that an insurer can cover adverse outcomes under worst-case scenarios. Surplus can be:
Relying on it directly might give a false sense of security. Essentially, the framework is designed to focus on the stability of the insurer’s risk profile and to guarantee that sufficient funds are set aside to meet obligations regardless of fluctuating surplus levels.