The risk margin is a key feature of the European Union’s Solvency II regime for insurers. That doesn’t mean it’s popular.
The risk margin is meant to cover the potential costs of transferring insurance policies to a third party should an insurer go bust, and the UK’s Prudential Regulation Authority has been promising to reform it for almost as long as the two-year-old regime has been in force. A reform is now finally on the horizon, although questions over its compatibility with Solvency II
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