SCR Calculator User Manual

Version 1.13.2.0 Last modified 2024-3-21

Single Asset SCR Outputs

When all necessary inputs are entered, you can click the "Calculate" button, and two panels will pop up:

  • The "Solvency Capital Requirements" Panel, to the right hand side
  • The "Cashflows & Sensitivities" Panel, to the bottom

The Solvency Capital Requirement (SCR) Panel is fairly easy to understand. Below is a screenshot. The different tabs contain the different regimes. If anything is unclear, click the "Explain this Calculation" link.

The "Redraw" button will cause the total market SCR and diversification benefit to be recalculated based on the component SCR values in the textboxes, and redraw the waterfall chart. This is useful for the user to manually modify any of the component SCRs and understand the marginal sensitivity of the total SCR on them. However, when you re-click the "Calculate" button in the main form, all the SCR values in this panel will be overwritten.

More Explanation on How to Access Japan-ESR and Korean-ICS

The Japan-ESR and Korea ICS are not explicitly shown among the tabs above unless you select them. You can select them by clicking the ‘Data & Parameters’ item in the Welcome Form Menu, then select ‘Specific Parameters’ and choose the options, like screenshots below.

Then all the ICS tabs will become the chosen Japan-ESR or K-ICS regime. This arrangement is because they are close variations of the ICS regime, so not worth a separate output tab.


Detailed Explanations

Below are explanations of the textboxes in each of the SCR tabs:

"Solvency II" tab
  • Equity SCR Equity Solvency Capital Requirement - an aggregated value from the next four entries.
  • Type 1 Equity Mainly Developed Market Traded Equities; also some special PE funds.
  • Type 2 Equity Emerging Market equities, Hedge Funds and most Private Equities.
  • Infra Project Infrastructure Project equity, a special type under Solvency II that enjoys some capital relief.
  • Infra Corp Infrastructure Corporate equity, also enjoys some capital relief compared to normal equities, but less so than Infrastructure Project equity.
  • Spread SCR Spread Solvency Capital Requirement - an aggregated value from the next four entries.
  • Spread Bond Spread SCR from credit bonds.
  • Spread Secur Spread SCR from securitised positions.
  • Spd Deri Up Spread SCR from Credit Derivatives under the spread-up shock. Only one of spread-up and spread-down shocks is used.
  • Spd Deri Down Spread SCR from Credit Derivatives under the spread-down shock. Only one of spread-up and spread-down shocks is used.
  • Interest Rate SCR Interest rate SCR from all fixed income assets under the interest rate up/down scenarios. Only one of rate-up and rate-down shocks is used.
  • Currency SCR Currency solvency capital requirement.
  • Property SCR Property solvency capital requirement.
  • Concentration Risk SCR Concentration risk solvency capital requirement. Normally only calculated at total B/S level.
  • Total Market Risk SCR Total market risk SCR - an aggregate of equity, property, spread, interest rate, concentration and currency risks.
  • Diversification Benefit Diversification Benefit - the difference between the arithmetic sum of the individual risk capital and the total market risk SCR.
  • Counterparty Default SCR Counterparty Default SCR - an aggregated value from the next two entries.
  • Type 1 Default SCR Type 1 Counterparty Default Risk SCR.
  • Type 2 Default SCR Type 2 Counterparty Default Risk SCR.
  • Probability of Default The annual probability of default series for the bond over its lifespan, starting from the nearest year. Presented for each year of the life of the bond. These probabilities can be used to de-risk the cashflows in the case of annuity cashflows. These values have been interpolated for each point in time, using EIOPA or PRA published data. Where PRA data is used and relevant, the notch-level interpolation method is also used.
  • Probability of Default (bps) Probability of default in the form of bps that represents a proportion of the bond's Z-spread. Presented for each year of the life of the bond. These values have been interpolated for each point in time, using EIOPA or PRA published data. Where PRA data is used and relevant, the notch-level interpolation method is also used.
  • Cost of Downgrade (bps) Cost of Downgrade in the form of bps that presents a proportion of the bond's Z-spread. Presented for each year of the life of the bond. These values have been interpolated for each point in time, using EIOPA or PRA published data. Where PRA data is used and relevant, the notch-level interpolation method is also used.
  • Long-Term Aver. Spread (bps) Long-Term Average Spread in the form of bps that were calibrated using historical data. Presented for each year of the life of the bond. These values have been interpolated for each point in time, using EIOPA or PRA published data. Where PRA data is used and relevant, the notch-level interpolation method is also used.
  • Fundamental Spd (bps) Calculated based on regulatory formula and using PD, CoD and LT Average Spread as input parameters. Calibrated for each year of the life of the bond. These values have been interpolated for each point in time, using EIOPA or PRA published data. Where PRA data is used and relevant, the notch-level interpolation method is also used.
  • MA Potential (bps) Matching Adjustment calculated as the spread-over-RFR (i.e. Z-spread) over the de-risked-cashflows-weighted-average of Fundamental Spreads over the life of the bond.
  • Return-on-SCR Expected return divided by the dominant risk type SCR value.
"Bermuda SCR" tab
  • Equity BSCR Equity Bermuda Solvency Capital Requirement (BSCR) - an aggregated value from the next four entries.
  • Equity Type 1 Equity Type 1 BSCR - mainly DM Equties (scope of DM defined by Bermuda Monetary Authority).
  • Equity Type 2 Equity Type 2 BSCR - mainly EM Equities.
  • Equity Type 3 Equity Type 3 BSCR - infrastructure equity.
  • Equity Type 4 Equity Type 4 BSCR - real estate.
  • Interest Rate BSCR Interest rate BSCR from all fixed income assets. Only one of rate-up and rate-down shocks is used.
  • Fixed Income Risk BSCR Fixed Income Risk BSCR - category- and rating-based.
  • Currency Risk BSCR Currency BSCR.
  • Concentration Risk BSCR Concentration risk BSCR. Normally only calculated at total B/S level.
  • Total Market Risk BSCR Total market risk BSCR - an aggregate of equity, fixed income, interest rate, concentration and currency risks.
  • Diversification Benefit Diversification Benefit - the difference between the arithmetic sum of the individual risk capital and the total market risk BSCR.
  • Return-on-BSCR Expected return divided by the dominant risk type BSCR value.
"Swiss Solvency" tab
  • Growth SST Growth asset price risk under the Swiss Solvency Test (SST) - an aggregated value from the next four entries. Note that aggregation is risk-factor-based rather than via a correlation matrix.
  • Equity Equity price risk under the SST.
  • Real Estate Property price risk under the SST.
  • Private Equity Private Equity price risk under the SST.
  • Hedge Fund Hedge Fund price risk under the SST.
  • Spread SST Credit spread capital under the SST. Note that this is based on one or several credit risk factors.
  • Interest Rate SST Interet rate risk under the SST. Note that this is based on one or several interest rate risk factors.
  • Currency Risk SST Currency capital under the SST.
  • Pre-Scene Market risk SST aggregated before the addition of any scenario-based risk capital.
  • Scenario-SST Scenario-based risk capital add-ons under the regulatory-defined SST market risk scenarios.
  • Market Risk SST Market risk SST aggregated including scenario-based risk capital.
  • Diversification Benefit Diversification Benefit - the difference between the arithmetic sum of market and credit risk capital and the total market risk SST.
  • Credit Default Risk SST Credit default risk capital under the SST, calculated using BASEL III methods.
  • Return-on-SST Expected Return divided by the domnant component of SST risk capital.
"C-Ross" tab
  • Domestic Int Rate Risk Domestic market (China) interest rate risk. Note this is not calculated, but a user-given input in the SCR Calculator. The SCR Calculator currently only implements foreign asset risk types.
  • Domes Growth Asset Risk Domestic market (China) growth asset price risk. Note this is not calculated, but a user-given input in the SCR Calculator. The SCR Calculator currently only implements foreign asset risk types.
  • Domes Real Estate Risk Domestic market (China) real estate price risk. Note this is not calculated, but a user-given input in the SCR Calculator. The SCR Calculator currently only implements foreign asset risk types.
  • Emerging Market Fixed Income Emerging market (ex-China) fixed income asset price risk.
  • Dev Market Fixed Income Developed market fixed income asset price risk.
  • EM Growth Asset Risk Emerging market (ex-China) growth asset price risk.
  • DM Growth Asset Risk Developed market growth asset price risk.
  • Currency Risk Foreign currency risk from CNY perspective.
  • Total Market Risk Total market risk, an aggregated value from all the market risk components.
  • Diversification Benefit Diversification Benefit - the difference between the arithmetic sum of the market risk components and the total market risk risk capital.
  • Return-on-Reg Capital Expected Return divided by the domnant component of market risk capital.
"LAGIC" tab
  • Equity Risk Capital Equity price level risk and volatility risk for options.
  • Property Risk Capital Property price level risk.
  • Spread Risk Capital Spread widening risk.
  • Real Interest Rate Up Real interest rate up risk.
  • Real Interest Rate Down Real interest rate down risk.
  • Expected Inflation Up Expected inflation up risk, relevant for nominal bonds.
  • Expectred Inflation Down Expected inflation down risk, relevant for nominal bonds.
  • Currency Up Risk Currency up risk (against AUD).
  • Currency Down Risk Currency down risk (against AUD).
  • Total Market Risk Capital Total market risk, an aggregated value from the individual market risk components.
  • Diversification Benefit Diversification Benefit - the difference between the arithmetic sum of the market risk components and the total market risk risk capital.
  • Return-on-Reg Capital Expected Return divided by the domnant component of market risk capital.
"SnP" tab
  • Equity Risk Charge Equity risk charge.
  • Property Risk Charge Property risk charge.
  • Bond Market Risk Charge Bond market risk charge.
  • Bond Credit Risk Charge Bond credit default risk charge.
  • Total S&P Capital Total market and credit risk capital charge.
  • Diversification Benefit Diversification Benefit - the difference between the arithmetic sum of the market risk components and the total market risk risk capital.
  • Return-on-Reg Capital Expected Return divided by the domnant component of market/credit risk capital.
"ICS" tab
  • Equity Equity risk capital - an aggregated value of equity level and volatility risks.
  • Equity DM DM listed Equties risk capital.
  • Equity EM EM listed Equities risk capital.
  • Equity Hybrid Preferred Equities / Hybrid Bonds risk capital.
  • Equity Other Risk capital on other Equities - Hedge Funds, Private Equities, etc.
  • Eq Level Eq Level risk - an aggregated value from the previous four components.
  • Eq Vol Equity volatility up risk.
  • Int Rate Risk Capital Interest rate risk (through stochastic simulation).
  • Spread Up Risk Non-Default Credit Spread up risk.
  • Spread Down Risk Non-Default Credit Spread down risk.
  • Prop Property price risk.
  • Currency Risk Currency risk.
  • Concentration Risk Concentration risk.
  • Total Market Risk Capital Total market risk capital charge.
  • Diversification Benefit Diversification Benefit - the difference between the arithmetic sum of the market risk components and the total market risk risk capital.
  • Credit Default Risk Credit default risk capital.
  • Return-on-Reg Capital Expected Return divided by the domnant component of market risk capital.
"SgRBC" tab
  • Equity Risk Equity risk capital charge.
  • Interest Rate Risk Interest rate risk calibrated through risk free curve shocks up/down.
  • Spread Risk Credit Spread up risk calibrated through spread widening stress.
  • Property Risk Property price risk.
  • Currency Risk Currency risk for all non-SGD currency exposures.
  • Total Market Risk Total market risk capital charge.
  • Diversification Benefit Diversification Benefit - the difference between the arithmetic sum of the market risk components and the total market risk risk capital.
  • Return-on-Reg Capital Expected Return divided by the domnant component of market risk capital.
"TaiwanRBC" tab
  • Equity Risk Equity risk capital charge.
  • Property Risk Property risk capital charge.
  • Fixed Income Risk Fixed income risk charge, applicable to all fixed income assets on a notch-basis.
  • Currency Risk Currency risk capital charge, based on currency of the insurance contract and of the hypothecating assets.
  • Concentration Risk Concentration risk applicable to all assets except for cash and government bonds. Calculated using Herfindahl_Scaler.
  • Total Market Risk Total market risk capital charge.
  • Diversification Benefit Diversification Benefit - the difference between the arithmetic sum of the market risk components and the total market risk risk capital.
  • Return-on-Reg Capital Expected return divided by the dominant component of market risk capital.
"HK RBC" tab
  • Equity Risk PCR Equity risk capital charge.
  • Interest Rate Risk PCR Interest rate risk calibrated through risk free curve shocks up/down.
  • Spread Widening Risk PCR Credit Spread up risk calibrated through spread widening stress.
  • Property Risk PCR Property price risk.
  • Currency Risk PCR Currency risk for all non-HKD currency exposures.
  • Total market risk capital charge Total market risk capital charge.
  • Diversification Benefit PCR Diversification Benefit - the difference between the arithmetic sum of the market risk components and the total market risk risk capital.
  • Return on Regulatory Capital Expected return divided by the dominant component of market risk capital.