Chapter 10

[rlsrachaellouisesmith]

In Chapter 10 there is a very small section on the importance of data quality under SII.
The second reason it is deemed crucial is that it allows:
the application of a wider range of methodologies for calculating the best estimate, which improves the chances of application of adequate and robust methods for each case.
How does data quality allow for a wider range of methodologies?
I thought the best estimate had to be calculated using the prescribed methodology under SII?

Thank you

 

[Lindsay Smitherman]

Here's an example: having good data might facilitate using a stochastic model for valuing options / guarantees, rather than having to take a more approximate 'option pricing' type approach.

 

[rlsrachaellouisesmith]

Perfect, thank you!

 

[rlsrachaellouisesmith]

Hi

Another small question for Chapter 10:
- we are given the example that ancillary own funds could be unpaid shareholder capital, could it also include a contingent loan?
- is it true that a mutual would not be expected to have ancillary OF, but if they did it would only be as a result of an exceptional injection of capital, perhaps from the same provider of seed capital?

Thank you,

 

[rlsrachaellouisesmith]

Hi

Another small question:
- would it ever be appropriate to use model points instead of policy data for the calculation of regulatory capital requirements?
I think the answer would be no, though they might possibly be used in the ORSA or equivalent (depending on the jurisdiction).

Thank you

 

[Lindsay Smitherman]

Model points can be used under Solvency II, provided certain conditions are met - including being able to validate that they give a result that is sufficiently accurate.

 

[Lindsay Smitherman]

Hi

Another small question for Chapter 10:
- we are given the example that ancillary own funds could be unpaid shareholder capital, could it also include a contingent loan?
- is it true that a mutual would not be expected to have ancillary OF, but if they did it would only be as a result of an exceptional injection of capital, perhaps from the same provider of seed capital?

Thank you,

This is a minor and relatively obscure part of the SA2 course. If you want to read up more on ancillary own funds (although not something that I would recommend as a good use of precious study time!) the following might be of interest:
https://www.bankofengland.co.uk/-/media/boe/files/paper/2020/december/gl-ancillary-own-funds.pdf
https://register.eiopa.europa.eu/CE...unds-Criteria-supervisory-approval-of-AOF.pdf