Solvency II Standard Formula SCR: Life Underwriting Risk Module – Revision Risk Sub-module

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According to original CEIOPS guidance, ‘revision risk’ is intended to capture the risk of adverse variation of an annuity’s amount, as a result of an unanticipated revision of the claims process. CEIOPS (EIOPA’s predecessor) envisaged that this risk would only be applied to:

-          Annuities arising from non-life claims (including accident insurance, but excluding workers compensation) where the amount of the annuity may be revised during the year; and

-          Benefits that can be approximated by a life annuity arising from non-life claims (including accident insurance, but excluding workers compensation) where the amount of the annuity may be revised during the next year).

The calibration in the final Solvency II Delegated Act does not appear to have changed since early iterations of the SCR (e.g. QIS4). It involves calculating the capital charge assuming an increase in 3% in the annual amount payable for annuities exposed to revision risk.

Version dated 7 December 2015

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