Date: 25th June 2021
Author: BdV, BETTER FINANCE
Type: Research papers
In the study about the Solvency and Financial Condition Reports (SFCRs) - that have to be disclosed under the Solvency II Directive (Art. 51) – we take a closer look at eight different figures that are calculated and rated:
- Transparency, expressed on a point scale (from -2 to 19);
- Solvency ratio, expressed as a percentage of existing capital out of insurance
liabilities; - Expected profits, as a percentage of profit (calculated in future premiums) out of
the total own funds; - Market risk, as a percentage out of total risk;
- Government bonds, as a percentage of out of total assets;
- Diversification; showing how well diversified the portfolio is;
- Surplus funds; showing the additional profits not yet disbursed to policyholders;
and - Risk margin, as a percentage of provisions covered in addition by a third party.
These figures (or metrics) are explained in the sections below. Each figure or metric is then assigned a colour reflecting “traffic lights”:
- “Green” figures indicate a situation that is quite good from the perspective of a policy holder;
- “Yellow” figures express a potential of optimization while the situation is nevertheless still acceptable; and
- “Red” is a sign for a problem that should be solved; or
- “Light Grey” is used to indicate an unreasonable high solvency ratio.
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