Solvency II: Internal models shrink capital needs, QIS5 results show

EIOPA summarizes the results of QIS5 in press release here (pdf).

Compared to the calculation under Solvency I standards, insurance groups have €86 billion less surplus capital available, which is a reduction of 44%. However, the QIS5 exercise demonstrated that this effect would be largely absorbed if insurance groups apply internal models and transitional measures to calculate the capital requirements under Solvency II. This would limit the reduction of the surplus to €3 billion, which represents roughly 1%.

That €83 billion difference translates to US$116 billion of capital that could be freed up.

An ocean away, it sounds like every actuarial modeler in Europe just got a lifetime job.

Report here (pdf).

Annexes to the report here (pdf).

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