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Answer: The company can lower the capital charges assessed for determining the capital requirement by decreasing investment risk.
**C is correct.** Solvency II provides for capital charges for Investment risk, underwriting risk, and operational risk. Lowering any of these risks will lower the related capital charges assessed for determining the capital requirement levels. **A is incorrect.** An insurer whose capital falls below the minimum capital requirement may be prevented from taking new business. **B is incorrect.** The minimum capital requirement is lower than the solvency capital requirement, so breaching the solvency capital requirement may still leave the company above the minimum capital requirement. **D is incorrect.** European insurers are regulated by a European Union regulator, not by state regulators. **Learning Objective:** Evaluate the capital requirements for life insurance and property-casualty insurance companies.
Author: LeetQuiz .
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The CFO and CRO at a French property-casualty insurer are discussing the impact recent flooding in Europe is having on their company. They are concerned about a surge in property insurance claims causing the company's regulatory capital to fall below the solvency capital requirement (SCR) prescribed under Solvency II. Which of the following would be a result of this situation?
A
The company will be prevented from writing new property-casualty policies.
B
A plan to bring capital above the minimum capital requirement must be formulated.
C
The company can lower the capital charges assessed for determining the capital requirement by decreasing investment risk.
D
A waiver of capital requirements can be granted by the French insurance regulator.