In this series, we apply the magnifying glass to how the standard formulae for selected SCR sub-modules were calibrated. We investigate the history behind the calibration, the risks that were excluded from the calibration, and potential shortcomings as a result.
Look out for future articles in this series on other sub-modules.
When assessing the appropriateness of the expense risk capital requirement in the SCR, consideration should be given to the risk of new business volumes being substantially lower than expected and to what extent the macroeconomic environment is inflation controlled.
Reference and further reading: This article uses information from:
SAM steering committee Position Paper 108 - Life SCR - Retrenchment Risk (fsca.co.za)
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