Template-Type: ReDIF-Article 1.0

Author-Name: Zsuzsanna Bartfai-Bora
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: borazs@mnb.hu

Author-Name: Adam Huszarik
Author-Workplace-Name: -  
Author-Email: adam.huszarik95@gmail.com

Author-Name: Norbert Holczinger
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: holczingern@mnb.hu


Title: Stability versus Volatility: Hungarian Experiences with the First Five Years of Solvency II Regarding Quantitative Elements

Abstract: It has been more than five years since the introduction of the Solvency II framework
(S2), which determines how insurers should operate in Europe, and this allows
for a detailed analysis of Hungarian developments. The new approach in S2 that
makes it similar to banking regulation, including the market-consistent valuation
principles and the application of a risk-based capital requirement, has stood the
test of time in recent years: the various shocks did not undermine the stability of the
Hungarian sector. This was largely due to the recommendation of the central bank
of Hungary (Magyar Nemzeti Bank, MNB) on holding a volatility capital buffer. This
is because the robust capital position of the sector as a whole has been maintained
in the context of 50-100-basis point reductions in capital adequacy levels in certain
individual cases, which justifies the use of the capital buffer. The balanced capital
position was also influenced by the conservative investment strategy, which resulted
in one of the lowest market risk exposures in Europe, against the backdrop of huge
government securities holdings, even by international standards.

Classification-JEL: G22, G29, G32
Keywords: Solvency II, capital adequacy, own funds, capital requirement, volatility capital buffer
Pages: 66-93
Volume: 21
Issue: 2
Year: 2022
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-21-2-st3-bartfai-bora-huszarik-holczinger.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:21:y:2022:i:2:p:66-93