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Loss-Absorbing Capacity of Technical Provisions

Calculate the Positive Loss-Absorbing Capacity of Technical Provisions Capacity Amount instantly.

€
€
€

LAC TP

€18 000 000

=

Gross BSCR - Net BSCR

€18 000 000

<

FDB

€25 000 000

1Step 1

LAC TP

LACTP=max⁡ ⁣(0,  min⁡(BSCR−nBSCR,  FDB))\mathrm{LAC}_\mathrm{TP} = \max\!\bigl(0,\;\min(\mathrm{BSCR} - \mathrm{nBSCR},\;\mathrm{FDB})\bigr)

Understand the Loss-Absorbing Capacity of Technical Provisions

Overview

This calculator implements the Loss-Absorbing Capacity of Technical Provisions (LAC TP) amount within the Solvency II standard formula.[1] LAC TP is one part of the Article 108 / Article 205 SCR adjustment for the loss-absorbing capacity of technical provisions and deferred taxes.[2][3]

Input Terms

  • Gross BSCR: The Basic Solvency Capital Requirement before recognizing the loss-absorbing effect of future discretionary benefits.
  • Net BSCR: The Basic Solvency Capital Requirement calculated with the Article 206 future-discretionary-benefit modifications.
  • FDB: Technical provisions without risk margin in relation to future discretionary benefits. FDB caps the positive LAC TP amount.[1]

Technical Rationale

LAC TP recognizes that future discretionary benefits can absorb part of an unexpected loss when the undertaking can reduce those benefits under the Article 206 assumptions. The calculation compares Gross BSCR with Net BSCR, then applies the FDB cap so the recognized amount cannot exceed the eligible discretionary-benefit capacity.[1]

Operational risk is handled separately at the SCR layer and in the LAC DT base, not inside the LAC TP formula. The output therefore represents the technical-provisions component passed to the final SCR workflow alongside LAC DT.[3][1]

Important Notes

  • Net BSCR basis: Net BSCR should already reflect the Article 206 future-discretionary-benefit modifications, including eligible management actions and material legal, regulatory, or contractual restrictions on benefit distribution.
  • FDB boundary: FDB is not a generic bonus reserve. It is the technical provisions without risk margin in relation to future discretionary benefits.
  • 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 LAC TP result is intended to support the LAC TP component feeding the S.25.01.01 standard-formula reporting view.[5]

Sources

  1. Delegated Regulation (EU) 2015/35 - Art. 206 (Adjustment for the loss-absorbing capacity of technical provisions) - EIOPA
  2. Directive 2009/138/EC - Art. 108 (Adjustment for the loss-absorbing capacity of technical provisions and deferred taxes) - EIOPA
  3. Delegated Regulation (EU) 2015/35 - Art. 205 (General provisions for the LAC TP and LAC DT adjustment) - EIOPA
  4. Directive 2009/138/EC - Art. 37 (Capital add-on) - EIOPA
  5. Commission Implementing Regulation (EU) 2023/894 - QRT S.25.01.01 (SCR standard formula) - 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.