Policy Letter No. 15, 2011

Long-Term Guarantees and the Countercyclical Premium Under Solvency II

This article discusses the effects of the countercyclical premium discussed in insurance supervision in the context of Solvency II. While the basic principle of introducing countercyclical elements into Solvency II is endorsed, the authors argue for a system based on market scenarios which would enforce stricter capital requirements in boom times and less strict requirements in times of crisis.