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Risk Margin Time Reduction Factor

Calculate the Article 37 Time Reduction Factor instantly.

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Article 37 Time Reduction Factor

0.97

1Step 1

Floor Factor

Floor Factor=1−Future-Risk Reduction Cap\textit{Floor Factor} = 1 - \textit{Future-Risk Reduction Cap}
2Step 2

Uncapped Time Factor

Uncapped Time Factor=max⁡(0,1−Annual Future-Risk Reduction Rate)Projection Year Index\textit{Uncapped Time Factor} = {\max(0, 1 - \textit{Annual Future-Risk Reduction Rate})}^{\textit{Projection Year Index}}
3Step 3

Article 37 Time Reduction Factor

Article 37 Time Reduction Factor=max⁡(Floor Factor,Uncapped Time Factor)\textit{Article 37 Time Reduction Factor} = \max(\textit{Floor Factor}, \textit{Uncapped Time Factor})

Understand the Risk Margin Time Reduction Factor

Overview

This calculator isolates the Article 37 future-risk time reduction factor for one projected risk-margin year.[1]

Input Terms

  • Projection Year Index: The projection year used in the Article 37 time-factor exponent.
  • Annual Future-Risk Reduction Rate: The current regulatory reduction-rate parameter.
  • Future-Risk Reduction Cap: The cap that prevents the time factor from reducing projected risk below the permitted floor.

Technical Rationale

The calculator returns the greater of the capped floor and the uncapped annual reduction factor:

`Time factor = max(1 - cap, (1 - annual reduction rate)^year)`

Important Notes

  • Commission Delegated Regulation (EU) 2026/269 changed the 2015/35 risk-margin mechanics by adding the Article 37 time-factor reduction approach and changing the Article 39 Cost-of-Capital rate.
  • This is an educational atomistic calculator. Evidence over the selected rulebook basis, valuation date, and parameter source remains internal audit scope.
  • The result feeds the discounted-SCR term calculator and the wider risk-margin projection workflow.

Sources

  1. Delegated Regulation (EU) 2015/35 - Art. 37 (Risk margin) - EIOPA

Default values are illustrative sample inputs for navigation, training, and QA. Replace them with controlled data before using the result in capital analysis, governance, or reporting decisions.