CEIOPS have published a consultation which provides a comparative description of proxy methods for the valuation of technical provisions under the proposed Solvency II regime. These methods are being developed by the national proxy expert groups and, based on their suggestions, the Coordination Group on Proxies has proposed 'harmonised' valuation techniques to be tested under the forthcoming quantitative impact study, QIS4. Comments are invited by 15 February 2008.
The economic valuation approach envisaged under Solvency II requires (especially for so called long tail business in non-life insurance) sufficient statistical data and actuarial knowledge in order to apply appropriate actuarial methods. This report is concerned with those cases where one or both of these conditions are not met.
This consultation paper explores pragmatic solutions in order to overcome practical difficulties, and sets out a number of harmonised valuation techniques for the calculation of technical provisions. These techniques are called “proxies” since they are intended to substitute a lack of data or actuarial expertise in the valuation process.
For further information:CEIOPS publish paper on ‘Architecture of the Minimum Capital Requirement - Pros and cons of different approaches’ (507KB PDF)