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Article 34a PHRSS Prudent Deterministic Valuation

Calculate the Prudent Deterministic Best Estimate instantly.

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Prudent Deterministic Best Estimate

€104 000 000

1Step 1

TVOG Estimate from PHRSS

TVOG Estimate from PHRSS=max⁡(0,Weighted Best Estimate Under PHRSS−Certainty-Equivalent Best Estimate)\textit{TVOG Estimate from PHRSS} = \max(0, \textit{Weighted Best Estimate Under PHRSS} - \textit{Certainty-Equivalent Best Estimate})
2Step 2

TVOG as Share of SCR

TVOG as Share of SCR=TVOG Estimate from PHRSSSCR\textit{TVOG as Share of SCR} = \frac{\textit{TVOG Estimate from PHRSS}}{\textit{SCR}}
3Step 3

TVOG Below 5% of SCR (0/1)

TVOG Below 5% of SCR (0/1)=lte⁡(TVOG as Share of SCR,5)\textit{TVOG Below 5\% of SCR (0/1)} = \operatorname{lte}\left(\textit{TVOG as Share of SCR}, 5\right)
4Step 4

All Article 34a Conditions Met (0/1)

All Article 34a Conditions Met (0/1)=min⁡(Life Obligations Clearly Identified (0/1),Latest EIOPA PHRSS Scenario Set Used (0/1),Written Methodology Confirmation Completed (0/1),Undertaking Classified as Small and Non-Complex (0/1),TVOG Below 5% of SCR (0/1))\textit{All Article 34a Conditions Met (0/1)} = \min(\textit{Life Obligations Clearly Identified (0/1)}, \textit{Latest EIOPA PHRSS Scenario Set Used (0/1)}, \textit{Written Methodology Confirmation Completed (0/1)}, \textit{Undertaking Classified as Small and Non-Complex (0/1)}, \textit{TVOG Below 5\% of SCR (0/1)})
5Step 5

Default Stochastic Add-On Percent

Default Stochastic Add-On Percent=5\textit{Default Stochastic Add-On Percent} = 5
6Step 6

Default Stochastic Add-On Amount

Default Stochastic Add-On Amount=SCR×Default Stochastic Add-On Percent\textit{Default Stochastic Add-On Amount} = \textit{SCR} \times \textit{Default Stochastic Add-On Percent}
7Step 7

Selected Stochastic Add-On Amount

Selected Stochastic Add-On Amount=SCR×Selected Stochastic Add-On Percent\textit{Selected Stochastic Add-On Amount} = \textit{SCR} \times \textit{Selected Stochastic Add-On Percent}
8Step 8

Default Prudent Deterministic Best Estimate

Default Prudent Deterministic Best Estimate=Deterministic Best Estimate+Default Stochastic Add-On Amount\textit{Default Prudent Deterministic Best Estimate} = \textit{Deterministic Best Estimate} + \textit{Default Stochastic Add-On Amount}
9Step 9

Prudent Deterministic Best Estimate

Prudent Deterministic Best Estimate=Deterministic Best Estimate+Selected Stochastic Add-On Amount\textit{Prudent Deterministic Best Estimate} = \textit{Deterministic Best Estimate} + \textit{Selected Stochastic Add-On Amount}
10Step 10

Default Add-On Covers TVOG (0/1)

Default Add-On Covers TVOG (0/1)=gte⁡(Default Stochastic Add-On Amount,TVOG Estimate from PHRSS)\textit{Default Add-On Covers TVOG (0/1)} = \operatorname{gte}\left(\textit{Default Stochastic Add-On Amount}, \textit{TVOG Estimate from PHRSS}\right)
11Step 11

Selected Add-On Covers TVOG (0/1)

Selected Add-On Covers TVOG (0/1)=gte⁡(Selected Stochastic Add-On Amount,TVOG Estimate from PHRSS)\textit{Selected Add-On Covers TVOG (0/1)} = \operatorname{gte}\left(\textit{Selected Stochastic Add-On Amount}, \textit{TVOG Estimate from PHRSS}\right)
12Step 12

Selected Add-On Minus Default Add-On

Selected Add-On Minus Default Add-On=Selected Stochastic Add-On Percent−Default Stochastic Add-On Percent\textit{Selected Add-On Minus Default Add-On} = \textit{Selected Stochastic Add-On Percent} - \textit{Default Stochastic Add-On Percent}
13Step 13

Prudence Buffer Versus Weighted PHRSS Best Estimate

Prudence Buffer Versus Weighted PHRSS Best Estimate=Prudent Deterministic Best Estimate−Weighted Best Estimate Under PHRSS\textit{Prudence Buffer Versus Weighted PHRSS Best Estimate} = \textit{Prudent Deterministic Best Estimate} - \textit{Weighted Best Estimate Under PHRSS}

Understand the Article 34a PHRSS Prudent Deterministic Valuation

Overview

This calculator implements the Article 34a PHRSS prudent deterministic valuation control for life obligations with options and guarantees deemed immaterial.[1] It helps the undertaking assess whether the proportionality route can be used, quantify the implied stochastic add-on, and derive the prudent deterministic best estimate on a controlled basis.

Input Terms

  • Deterministic Best Estimate: The baseline best estimate produced without a full stochastic valuation for the scoped life obligations.
  • Weighted Best Estimate Under PHRSS: The weighted best estimate derived from the latest EIOPA prudent harmonised reduced set of scenarios.[2]
  • Certainty-Equivalent Best Estimate: The best estimate under the certainty-equivalent path used to isolate the time value of options and guarantees.
  • Selected Stochastic Add-On Percent: The add-on percentage applied to SCR in the final prudent deterministic best estimate. Enter `5` for the default Article 34a route or a prudently calibrated ad-hoc percentage if governance has approved one.
  • Control Flags: Article 34a governance checks for clearly identified obligations, latest EIOPA scenario use, written methodology confirmation, and small-and-non-complex classification.

Technical Rationale

The engine measures a PHRSS TVOG estimate as the excess of the weighted PHRSS best estimate over the certainty-equivalent best estimate. That estimate is then compared against SCR to test the Article 34a materiality threshold of less than 5% of SCR.[1]

The engine also computes two prudent deterministic outcomes:

  • a default prudent deterministic best estimate using the standard `5% × SCR` stochastic add-on described in EIOPA's PHRSS technical specifications; and
  • a selected prudent deterministic best estimate using the undertaking's chosen add-on percentage, which can be used to reflect an approved ad-hoc calibration where governance supports it.

The output therefore gives the undertaking both the eligibility test and the direct valuation overlay needed to evidence the proportionality route.

Important Notes

  • Scope: The reviewed-framework PHRSS route is targeted at life obligations with options and guarantees that are deemed immaterial under the Article 34a conditions, not as a replacement for full stochastic valuation across the whole life book.
  • Latest Scenario Set: Article 34a requires the most recent EIOPA scenario set for the materiality test, so the latest-scenario control should stay at `1` only when governance has confirmed the scenario pack date.[2]
  • LAC TP Boundary: EIOPA's technical specifications state that the stochastic supplement should stay constant through the SCR calculation process, so the add-on should not be used to manufacture extra LAC TP.
  • Interpretation: A passing `All Article 34a Conditions Met` output is a decision support signal, not a substitute for supervisory notification, internal policy evidence, or actuarial sign-off.

Sources

  1. Delegated Regulation (EU) 2015/35 - Art. 34a (Use of the prudent deterministic valuation of the best estimate for life obligations with options and guarantees that are deemed immaterial) - EUR-Lex
  2. Directive 2009/138/EC - Art. 77e (Technical information by EIOPA) - 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.