The capital-on-capital cost in solvency II risk margin

The presentation examines the capital-on-capital cost in insurance liability valuation and its effect on risk margin (RM) calculations. Capital-on-capital covers risks from future regulatory capital changes, distinct from cash-flow uncertainties. We compare two valuation approaches: one using backward iteration of the SCR risk measure and another based on additive-SCR (ASCR). Applying this to long-term equity-linked life insurance, we highlight the significant role of capital-on-capital in long-term liabilities, providing insights into RM and capital managemen