Capital Allocation and RORAC Optimization under Solvency II Standard Formula

2022-02-04T10:42:48+02:00February 4th, 2022|Solvency II|

Directive 2009/138 / EC Solvency II requires insurance and reinsurance undertakings to evaluate the Solvency Capital Requirement or through the so-called “standard formula” or through partial or full internal models. Focusing on the standard formula, the formula proposed by the regulator allows for a reduction in the capital due to the diversification effect, according to the typical subadditivity property of risk measures.