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Equity Risk

Market

Calculate the Equity Risk Capital instantly.

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€
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Type 1 Equity Risk

€17 840 000

+

Type 2 Equity Risk

€9 160 000

+

Long-Term Equity Risk

€3 300 000

=

Equity Risk Capital

€27 000 000

Equity Risk

Shock charge
Retained value
ModuleShockPre-shockPost-shockCharge
Residual Standard Type 1 Exposure-40%38 000 000 €22 800 000 €15 200 000 €
Residual Standard Type 2 Exposure-50%17 000 000 €8 500 000 €8 500 000 €
Eligible Long-Term Equity Exposure-22%0 €0 €3 300 000 €
1Step 1

Type 1 Total Shock Factor

Type 1 Total Shock Factor=Type 1 Equity Shock Rate+Symmetric Adjustment\textit{Type 1 Total Shock Factor} = \textit{Type 1 Equity Shock Rate} + \textit{Symmetric Adjustment}
2Step 2

Type 2 Total Shock Factor

Type 2 Total Shock Factor=Type 2 Equity Shock Rate+Symmetric Adjustment\textit{Type 2 Total Shock Factor} = \textit{Type 2 Equity Shock Rate} + \textit{Symmetric Adjustment}
3Step 3

Residual Standard Type 1 Exposure

Residual Standard Type 1 Exposure=max⁡(0,Total Equity Type 1 Exposure−Eligible Long-Term Equity Type 1 Exposure)\textit{Residual Standard Type 1 Exposure} = \max(0, \textit{Total Equity Type 1 Exposure} - \textit{Eligible Long-Term Equity Type 1 Exposure})
4Step 4

Residual Standard Type 2 Exposure

Residual Standard Type 2 Exposure=max⁡(0,Total Equity Type 2 Exposure−Eligible Long-Term Equity Type 2 Exposure)\textit{Residual Standard Type 2 Exposure} = \max(0, \textit{Total Equity Type 2 Exposure} - \textit{Eligible Long-Term Equity Type 2 Exposure})
5Step 5

Standard Type 1 Equity Charge

Standard Type 1 Equity Charge=Residual Standard Type 1 Exposure×Type 1 Total Shock Factor\textit{Standard Type 1 Equity Charge} = \textit{Residual Standard Type 1 Exposure} \times \textit{Type 1 Total Shock Factor}
6Step 6

Standard Type 2 Equity Charge

Standard Type 2 Equity Charge=Residual Standard Type 2 Exposure×Type 2 Total Shock Factor\textit{Standard Type 2 Equity Charge} = \textit{Residual Standard Type 2 Exposure} \times \textit{Type 2 Total Shock Factor}
7Step 7

Long-Term Equity Shock Factor

Long-Term Equity Shock Factor=0.22\textit{Long-Term Equity Shock Factor} = 0.22
8Step 8

Long-Term Equity Type 1 Charge

Long-Term Equity Type 1 Charge=Eligible Long-Term Equity Type 1 Exposure×Long-Term Equity Shock Factor\textit{Long-Term Equity Type 1 Charge} = \textit{Eligible Long-Term Equity Type 1 Exposure} \times \textit{Long-Term Equity Shock Factor}
9Step 9

Long-Term Equity Type 2 Charge

Long-Term Equity Type 2 Charge=Eligible Long-Term Equity Type 2 Exposure×Long-Term Equity Shock Factor\textit{Long-Term Equity Type 2 Charge} = \textit{Eligible Long-Term Equity Type 2 Exposure} \times \textit{Long-Term Equity Shock Factor}
10Step 10

Long-Term Equity Charge

Long-Term Equity Charge=Long-Term Equity Type 1 Charge+Long-Term Equity Type 2 Charge\textit{Long-Term Equity Charge} = \textit{Long-Term Equity Type 1 Charge} + \textit{Long-Term Equity Type 2 Charge}
11Step 11

Type 1 Equity Charge

Type 1 Equity Charge=Standard Type 1 Equity Charge+Long-Term Equity Type 1 Charge\textit{Type 1 Equity Charge} = \textit{Standard Type 1 Equity Charge} + \textit{Long-Term Equity Type 1 Charge}
12Step 12

Type 2 Equity Charge

Type 2 Equity Charge=Standard Type 2 Equity Charge+Long-Term Equity Type 2 Charge\textit{Type 2 Equity Charge} = \textit{Standard Type 2 Equity Charge} + \textit{Long-Term Equity Type 2 Charge}
13Step 13

Equity Risk Capital

Equity Risk Capital=Type 1 Equity Charge+Type 2 Equity Charge\textit{Equity Risk Capital} = \textit{Type 1 Equity Charge} + \textit{Type 2 Equity Charge}

Understand the Equity Risk

Overview

This calculator implements the gross capital requirement for the Equity Risk sub-module within the Solvency II Market Risk standard formula. The Equity Risk requirement is defined as the economic capital necessary to cover the loss in basic own funds resulting from a 1-in-200 year stress event affecting equity markets.[1]

Input Terms

  • Total Equity Type 1 Exposure: The aggregate market value of Type 1 equity holdings. This includes equities listed in regulated markets in countries which are members of the EEA or the OECD.
  • Total Equity Type 2 Exposure: The aggregate market value of Type 2 equity holdings. This includes equities listed in stock exchanges in countries which are not members of the EEA or the OECD, non-listed equities, hedge funds, and other alternative investments.
  • Eligible Long-Term Equity Type 1 / Type 2 Exposure: The portion of total Type 1 and Type 2 holdings that already passed the reviewed-framework long-term-equity eligibility control and therefore receive the reduced long-term-equity shock instead of the standard symmetric-adjusted bucket shock.[2][3][4][5][6]
  • Symmetric Adjustment: A regulatory adjustment calculated by EIOPA that modifies the standard equity stress to mitigate pro-cyclical effects on insurers' capital requirements.

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 a base shock of 39%, while Type 2 equities are subject to a base shock of 49%. Both shocks are adjusted by the current Symmetric Adjustment (SA), which can shift the final stress up or down within a prescribed corridor.[7][8] Where holdings qualify as long-term equity under the reviewed framework, the eligible split is carved out of the standard buckets and shocked separately at the reduced long-term-equity rate before the total equity SCR is recombined.[2][3][4][5][6]

Important Notes

  • The Symmetric Adjustment applies to both the Type 1 and Type 2 equity stress calculations, so monthly regulatory changes can move the result even when the portfolio itself is unchanged.
  • Long-Term Equity Split: This engine expects any qualifying long-term-equity subset to have already been justified upstream. The public `Long-Term Equity Eligibility` engine is the reviewed-framework control route intended to produce that eligible split.
  • 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.[9]
  • 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 LACDT 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.[10]
  • Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.25.01 standard-formula reporting view.[11]

Sources

  1. Directive 2009/138/EC - Art. 101 (99.5% VaR / 1-in-200 calibration) - EIOPA
  2. Directive 2009/138/EC - Art. 105a (Long-term equity investments) - EUR-Lex
  3. Delegated Regulation (EU) 2015/35 - Art. 171a (Long-term equity investments) - EIOPA
  4. Delegated Regulation (EU) 2015/35 - Art. 171b (Long-term equity investments: methodologies to avoid forced sales) - EUR-Lex
  5. Delegated Regulation (EU) 2015/35 - Art. 171c (Long-term equity investments: forced selling test) - EUR-Lex
  6. Delegated Regulation (EU) 2015/35 - Art. 171d (Long-term equity investments: collective investment undertakings with a lower risk profile) - EUR-Lex
  7. Delegated Regulation (EU) 2015/35 - Art. 169 (Standard equity risk sub-module) - EIOPA
  8. Delegated Regulation (EU) 2015/35 - Art. 172 (Symmetric adjustment of the equity capital charge) - EIOPA
  9. Delegated Regulation (EU) 2015/35 - Art. 84 (Look-through approach) - EIOPA
  10. Directive 2009/138/EC - Art. 37 (Capital add-on) - EIOPA
  11. Commission Implementing Regulation (EU) 2015/2450 - QRT S.25.01 - EUR-Lex

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.