Explanation:
Under Solvency II framework:
Option A is correct: When an insurance company's capital falls below the Solvency Capital Requirement (SCR), regulatory intervention occurs, which typically includes restrictions on taking on new business.
Option B is incorrect: Policy transfers to another insurance company generally occur at more severe capital deficiency levels, typically when capital falls below the Minimum Capital Requirement (MCR), not just the SCR.
Option C is incorrect: Insurance companies are required to have a solvency capital plan at all times, not only when capital falls below the MCR. The solvency capital plan is a continuous requirement under Solvency II.
Key Solvency II Capital Requirements:
Therefore, the correct statement is that when capital falls below the SCR, the company faces restrictions on taking new business.
In Solvency II, which of the following is true?
A
If capital falls below the solvency capital requirement, an insurance company is not allowed to take on further business.
B
If capital falls below the solvency capital requirement, an insurance company's policies may be transferred to another insurance company.
C
Insurance companies are only required to formulate a solvency capital plan if capital falls below the minimum capital requirement.
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