Which of the following is NOT a method to calculate the SCR?

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Multiple Choice

Which of the following is NOT a method to calculate the SCR?

The ability to compute the SCR relies on two primary paths: the standard formula and internal models, with a possible mix where some risk components use the internal model and others use the standard formula, all under regulatory approval. An external benchmarking approach, however, is not a formal method for calculating the SCR. Benchmarking might inform governance, validation, or calibration by comparing outcomes to industry peers, but it does not provide the precise, regulator-approved risk-based calculation required for the capital charge. In contrast, the standard formula uses predefined parameters to aggregate risk, and internal models use the company’s own risk distributions and dependencies to determine capital, with a mixed approach combining both where allowed. Therefore, external benchmarking is not a method to calculate the SCR.

The ability to compute the SCR relies on two primary paths: the standard formula and internal models, with a possible mix where some risk components use the internal model and others use the standard formula, all under regulatory approval. An external benchmarking approach, however, is not a formal method for calculating the SCR. Benchmarking might inform governance, validation, or calibration by comparing outcomes to industry peers, but it does not provide the precise, regulator-approved risk-based calculation required for the capital charge. In contrast, the standard formula uses predefined parameters to aggregate risk, and internal models use the company’s own risk distributions and dependencies to determine capital, with a mixed approach combining both where allowed. Therefore, external benchmarking is not a method to calculate the SCR.

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