Release Notes

Last Updated: 2024-3-21

30th June 2023

Japan ESR Added in v1.6.0

Japan ESR (Economic Solvency Ratio) is added in the SCR Calculator, in the form of a variation of the Insurance Capital Standard (ICS).

How to Use:

From Menu, the user can select "Data & Parameters" → "Specific Parameters" → "ICS Regime Choice" → "Japan-ESR". This way, all the ICS calculations become Japan-ESR calculations.

Unique Characteristics of Japan ESR as Compared to the ICS

The Japan ESR regime is going to be implemented by 2024/25 and closely resembles the ICS v2.0. The potential differences being contemplated mainly reflect the fact that it is going to be applicable to all insurers, large and small, in Japan, instead of just the largest international players as per the ICS, therefore proportionality and local adaptability are essential:

  • Look-through will not be mandatory for subsidiary stocks.
  • MOCE (Margin-Over-Current-Estimate): the Cost-of-Capital approach will be used instead of the Percentile approach as per the ICS.
  • The principle of proportionality means calculations by smaller regional insurers will be simplified.
  • Long-term Forward Rate will be reconsidered. The real interest rate element is 1.8% in the ICS but 0.9% as per local calibration.
  • The Last Observable Term will be revised because there are 30yrs or longer bonds held by some insurers and the artificial UFR kicking-in too soon will create hedging complexities.
  • Concentration risk charge might be too much in the case of a few highly concentrated portfolios so exemptions might be granted to local, smaller sized insurers.
  • Japan gov and regional bonds are exempt from credit risk because from local perspective these are high quality issues with credible government guarantees.
  • An Equity Symmetric Adjustment, similar to that of Solvency II, is likely to be introduced.
  • Strategic equity and infrastructure equity are likely to receive SII-like favourable capital relief.
The above points, where relevant, are reflected in the SCR Calculator's implementation.

Misc Improvements and Bug Fixes

  • The many "Get"/"Set" in Menu are now aggregated into a "Data & Parameters" form, making the user interface cleaner (hopefully).
  • Added tooltips to (almost) all labels and input controls. The tooltips appear upon mouse hovering.
  • Fixed a Cashflow form stats area incorrect height issue.
  • Fixed base currency inputbox not updating hedge ratio box visibility issue.
  • Added "Menu" → "Help" → "Download Demo Inputs" so new users will not struggle to find these more complicated example inputsheets.