Subsection 2: Standard formula

The Solvency Capital Requirement calculated in accordance with the standard formula is the sum of the following elements: a) The Basic Solvency Capital Requirement provided for in Article R. 352-5 ; b) The capital requirement for operational risk provided for in Article R. 352-8; c) The adjustment provided for in Article R. 352-9 to take account of the loss-absorbing capacity of the prudential technical provisions referred to in Article L….

I.-The Basic Solvency Capital Requirement is composed of individual risk modules which are aggregated. It comprises at least the following risk modules: a) Non-life underwriting risk; b) Life underwriting risk; c) Health underwriting risk; d) Market risk; e) Counterparty risk. The methods for aggregating the various risk modules, as well as the component of the Basic Solvency Capital relating to the risk on intangible assets, are specified in Article 87…

I.-The Basic Solvency Capital Requirement is calculated as follows: 1° The “non-life underwriting risk” module reflects the risk arising from non-life insurance commitments, taking into account the perils covered and the procedures applied in the conduct of this business. It takes account of the uncertainty weighing on the results of insurance and reinsurance undertakings in the context of their existing insurance and reinsurance commitments, as well as the new portfolio…

The “equity risk” sub-module referred to in 4° of I of Article R. 352-6 calculated in accordance with the standard formula includes a symmetrical adjustment mechanism for the standard capital requirement for equities which serves to cover the risk arising from variations in the level of equity prices. It also takes into account the provisions of article R. 352-12. The symmetric adjustment of the standard equity capital requirement, calibrated in…

The capital requirement for operational risk reflects operational risks, insofar as these are not already taken into account in the risk modules mentioned in article R. 352-5. This requirement is calibrated in accordance with 2° of Article R. 352-2. In the case of life insurance contracts where the investment risk is borne by the policyholder, the subscriber or the beneficiary of the contract, the calculation of the capital requirement for…

The adjustment to take account of the loss-absorbing capacity of prudential technical provisions within the meaning of Article L. 351-2 and deferred taxes, referred to in Article R. 352-4, reflects the potential offset of unexpected losses by a simultaneous decrease in either prudential technical provisions or deferred taxes, or a combination of the two. This adjustment takes account of the risk mitigation effect inherent in future discretionary participation in insurance…

Insurance and reinsurance undertakings may use a simplified calculation for a specific risk sub-module or module where this is justified by the nature, scale and complexity of the risks they face and where it would be disproportionate to require these undertakings to comply with the standard calculation. Simplified calculations are calibrated in accordance with 2° of article R. 352-2. The conditions for applying the principle of proportionality are defined in…

Where the calculation of the Solvency Capital Requirement using the standard formula proves inappropriate for an insurance or reinsurance undertaking, because the risk profile of that undertaking deviates significantly from the assumptions underlying that calculation formula, the Autorité de contrôle prudentiel et de résolution may, by reasoned decision, require that undertaking to replace a subset of the parameters used in the calculation using the standard formula with parameters specific to…

Life assurance undertakings which: a) Carry on the occupational retirement provision business referred to inArticle 7 of Order no. 2006-344 of 23 March 2006; b) Or are authorised by the Autorité de contrôle prudentiel et de résolution and provide retirement benefits paid with reference to retirement, or approaching retirement, if the premiums paid in respect of these benefits benefit from a tax deduction granted to subscribers; And provided that: i)…