Problem Statement
The client needed to estimate the Risk Capital Charge (RCC) for solar, wind, and infrastructure models under Solvency II, facing pressure from prolonged low-interest rates.
Solution Approach
1. Developed benchmark models (using Monte Carlo) and a qualitative index (CIRI) for RCC estimation.
2. Deployed the benchmark model to compare Net Present Value (NPV) of cash flows with insurer estimations.
3. Conducted 10K realizations to estimate the final RCC.
Client Impact
- Improved RCC estimation process.
- Assisted the Treasury function in conserving capital and eliminating warning indicators to regulators.
- Enhanced ongoing monitoring model activities and identified required action items.
Case Studies
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