Equity Risk

Overview

This calculator implements the gross capital requirement for the Equity Risk sub-module within the Solvency II Market Risk standard formula.^[1][2] The engine is row-based: each equity asset row carries its classification bucket and any candidate preferential treatment, while global controls appear only when they change the formula result: the Article 172 symmetric adjustment, the Article 173 blending weight, and the 2027 negative-value switch.^[3]

Input Terms

• Equity Asset Rows: Each row captures the asset or fund sleeve name, market value, Article 168 classification bucket, candidate treatment, and whether a negative value is an unlimited-loss exposure.
• Type 1 Classification Buckets: Listed EEA/OECD regulated-market equity, EU MTF equity with member-state head office, and qualifying Article 168 Type 1 fund or portfolio exposure.
• Type 2 Classification Buckets: Listed non-EEA/OECD equity, unlisted equity, alternative investment equity exposure, and unknown or unclassified exposure. Unknown holdings are forced into Type 2 treatment instead of being skipped.
• Preferential Treatment Candidates: Row-level long-term equity, strategic equity, duration-based equity, and Article 173 transitional selections carve the relevant exposure out of the standard buckets when the selected treatment is compatible with the row classification.^{[4][5][6][7][8][9]}
• Qualifying Infrastructure Equity / Corporate Equity Rows: The qualifying infrastructure sub-module rows identified under Articles 164a, 164b, and 168, shocked at the infrastructure calibrations before being aggregated on the Type 2 side of the Article 168 formula.^[1][2]
• Negative Unlimited-Loss Rows: Negative Type 1 or Type 2 row values are recognized only when the 2027 negative-value treatment switch is enabled; otherwise they are disclosed but excluded from the charge.
• Article 84 Look-Through: Article 84 remains an upstream classification and exposure-preparation concept. The Equity Risk calculation consumes the resulting asset rows rather than asking for a separate normalized-equity-exposure control.
• Symmetric Adjustment: The EIOPA monthly symmetric adjustment and corridor regime are shown only when the current row mix has SA-sensitive standard or Article 173 exposure.

Technical Rationale

The Equity Risk gross capital requirement is calibrated to a 99.5% confidence level over a one-year horizon. Under the Standard Formula, this is modeled as an instantaneous decrease in the market value of equity investments.

Type 1 equities are subject to the fixed Article 168 base shock of 39%, while Type 2 equities are subject to the fixed base shock of 49%. Both shocks add the Symmetric Adjustment (SA), which is bounded to the selected Article 172 corridor before use.^[2][10] Qualifying infrastructure equities use `30% + 77% * SA`, and qualifying infrastructure corporate equities use `36% + 92% * SA`.^[2]

Where holdings qualify as long-term equity, strategic equity, or duration-based equity, the eligible split is carved out of the standard buckets and shocked separately at 22% before the total equity SCR is recombined. Article 173 transitional holdings use a governed blend between 22% and the standard Type 1 or Type 2 shock. The engine blocks preferential recognition if the combined preferential candidates exceed the relevant Type 1, Type 2, infrastructure, or infrastructure corporate exposure bucket, so invalid preferential splits do not create an understated capital charge.^{[5][4][6][7][8][9]}

Important Notes

• Engine placement: Equity Risk now lives in the Engines section because it composes row-level equity exposure, Type 1 / Type 2 classification, symmetric adjustment, strategic participation, long-term equity treatment, and infrastructure equity treatment. Atomistic equity factors and eligibility checks remain in Calculators.
• The Symmetric Adjustment applies additively to Type 1 and Type 2 equity stress calculations, so monthly regulatory changes can move the result even when the portfolio itself is unchanged.
• The Symmetric Adjustment input is fail-safe bounded to +/-10 percentage points under the current Article 172 regime and supports the +/-13 percentage-point corridor applying from 30 January 2027.
• Legal factors: Type 1, Type 2, infrastructure project, infrastructure corporate, and infrastructure SA multipliers are fixed rulebook parameters in standard-formula mode, not user-editable shock assumptions.
• Long-Term Equity Split: This calculator expects any qualifying long-term-equity subset to have already been justified upstream. The public `Long-Term Equity Eligibility` calculator is the reviewed-framework control route intended to produce that eligible split.
• Strategic Equity Treatment: Strategic participations receive the 22% shock when the row is selected as strategic equity; supporting Article 171 evidence belongs in the upstream governance workflow, not as a duplicate capital input.
• Article 84 Look-Through: The calculator expects any fund look-through and exposure normalization to have already produced the asset rows. It does not require an Article 84 normalized exposure or tolerance amount to calculate the equity charge.
• Recognition controls: The row classification and row treatment carry the calculation state. Preferential split integrity is still checked so selected reduced-shock rows cannot exceed the available classified exposure.
• Leveraged Fund Input: Where the equity exposure comes through a leveraged investment fund, first use the standalone Leveraged Fund Look-Through calculator to derive the capped look-through loss. Then route the resulting amount to Type 1 or Type 2 based on the underlying equity classification.
• Latest EIOPA market/counterparty update: Hybrid instruments with equity and debt characteristics should first pass through the standalone Hybrid Instrument Decomposition calculator. Short equity positions and other financial risk mitigants should pass through the standalone Financial Risk Mitigation Admissibility calculator before any mitigation benefit is recognized in this module.
• Look-Through Approach: Per Article 84 of the Delegated Regulation, insurers must "look through" investment funds to the underlying holdings so exposures are allocated to the correct equity buckets before this standalone charge is applied.^[11]
• Gross vs. Net SCR: This calculator determines the standalone Equity Risk SCR. Solvency II risk is only finalized as a net impact on Basic Own Funds after diversification in Market Risk, then within BSCR, and after the top-level LAC TP and LAC DT adjustments.
• Regulatory deviation: Material deviation from standard-formula assumptions at this layer may support a capital add-on or a move toward an internal model where justified.^[12]
• Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.25.01.01 standard-formula reporting view.^[13]