Intangible Asset Risk

Overview

This calculator implements the gross capital requirement for the Intangible Asset Risk module within the Solvency II standard formula.^[1] The Intangible Asset Risk requirement is defined as the economic capital necessary to cover a loss of 80% in the carrying value of intangible assets on the Solvency II balance sheet, calibrated at a 1-in-200 year confidence level.^[2]

Input Terms

• Intangible Asset Carrying Value: The Solvency II value of recognized intangible assets (e.g., software or brands) as stated on the economic balance sheet.^[3]
• Charge Factor: The prescribed 80% regulatory stress factor applied to the carrying value of these assets.^[1]

Technical Rationale

The Intangible Asset Risk module follows a 99.5% confidence level over a one-year horizon. Under Solvency II, most intangible assets (such as goodwill) are valued at zero. However, specific identifiable intangibles, such as software, that can be sold separately may be recognized on the balance sheet.^[3]

The calculation applies an 80% haircut to the carrying value of these recognized assets. This significant charge reflect the assumption that in a 1-in-200 year stress situation, these assets would lose most of their value or become illiquid, providing little to no protection for policyholders. Unlike market or underwriting risks, intangible asset risk is not diversified; it is added linearly to the diversified BSCR total.^[1]

Important Notes

• Linear Addition: To ensure regulatory accuracy, the Intangible Asset Risk is not part of the BSCR square-root aggregation. It is a linear add-on that must be included after the diversified BSCR result has been established.
• Valuation Prerequisite: Only intangible assets that meet the strict recognition criteria under Article 12 of the Delegated Regulation should be entered here. Misclassification of unrecognized items will overstate the total own-funds and the corresponding capital charge.
• Gross vs. Net SCR: This calculator determines the standalone Intangible Asset Risk SCR. Solvency II risk is only finalized as a net impact on Basic Own Funds 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.^[4]
• Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.25.01 standard-formula reporting view.^[5]