In the landscape of Solvency II internal models, market and credit are significant risk drivers of the Solvency Capital Requirement. In April 2021, the European Insurance and Occupational Pensions Authority (EIOPA) issued the 2019 update of the annual Europe-wide comparative study on the modelling of market and credit risk within Internal Models (IM), along with a comparison with the Standard Formula (SF). The EIOPA benchmark study shows that, for all asset-liability portfolios, combined market and credit risk capital charges from the IM benchmark are higher than the SF. This short note provides a summary of this update and related key takeaways, including the main expected regulatory and modelling challenges in the near future.
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EIOPA’s Market and Credit Risk Comparative Study: Key takeaways
Key takeaways from EIOPA’s comparative study on market and credit risk modelling.