Working Party on Solvency Margins. Technical risks

Document description

The main risk that we are concerned with here is the possibility of a trading loss arising because one or more elements in the premium basis turn out to be inaccurate. Two cases may be distinguished: 1) Where the premium rates are adequate but losses arise from short-term fluctuations\; 2) Where the premium rates are wrong. An interesting question at this point is how a particular company can tell which of the two positions it is in when a loss actually arises but we shall return to this later. For the time being we shall deal with the easier of the two cases: 1).