Table of coefficients set by the Solvency II delegated regulation that governs aggregation of SCR modules and submodules, and which alone produces the standard formula's diversification benefit.
The standard formula aggregates through a square root of a double sum weighted by correlation coefficients fixed in delegated regulation 2015/35. These coefficients are not estimated by the undertaking, they are given, and they apply identically to a Maltese insurer and a German group. Three practical consequences follow. First, a monoline company gets no diversification benefit across modules while a composite group gets a great deal, which explains part of the sector's consolidation. Second, the coefficients are deliberately conservative and sometimes asymmetric, the interest rate submodule being aggregated with equity risk through a coefficient that depends on the direction of the rate shock. Third, when an undertaking demonstrates that its risk profile departs significantly from these assumptions, the open route is an undertaking specific parameter on certain submodules, or a partial internal model, not the quiet adjustment of a coefficient.
Delegated Regulation (EU) 2015/35, applicable from January 1, 2016 alongside Solvency II. The correlation coefficient between market risk and non-life underwriting risk is set there at 0.25, and between non-life and health underwriting at 0.25 as well. For an insurer whose two modules weigh 420M and 180M EUR, aggregation returns the square root of 420 squared plus 180 squared plus twice 0.25 times 420 times 180, that is 490M EUR instead of 600M EUR added.
matrice de corrélation Solvabilité II, correlation matrix, coefficients de corrélation du règlement délégué