QMR HFM: Formula In SCR-B3G Not According To EIOPA Specifications (Doc ID 1538302.1)

Last updated on AUGUST 08, 2016

Applies to:

Oracle Quantitative Management and Reporting for Solvency II - Version 2.0.0.0.000 and later
Information in this document applies to any platform.
**12.1.2014***

Symptoms

In Quantitative Management and Reporting for Solvency II (QMR) for the SCR-B3G, there seems to be an error in the formula to calculate Capital requirement for Operational Risk based on earned premiums (Oppremiums), Cell A11. The formula according to EIOPA is as follows:

This is the result of the calculation based on earned premiums. A11=0.04*(A5-A6) +0.3*A7+max(0, 0.04*(A5-1.2*A8-(A6-1.2*A9)))+max(0, 0.03*A7-1.2*A10)

However, QMR calculates the "0.3*A7" part of the equation incorrectly. See B :

A: 0 = 0.04 * (0 - 0)
B: 4 = 0.03 * 120
C: 0 = 0 - (1.2 * 0)
D: 0 = 0 - (1.2 * 0)
E: 0 = 0.04 * (0 - 0)(0.04 * (C - D))
F: 0 = Max(0, 0) (Max(0, E))
G: -164 = (0.03 * (120) - (1.2 * 0)
H: 0 = Max(0, -164) (Max(0, G))
I: 4 = 0 + 4 + 0 + 0 (A + B + F + H)

It appears that 0.03*120 should be 0.3*120.

Cause

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