Own risk and solvency assessment

(1) The risk management system includes an own risk and solvency assessment, which insurance undertakings must carry out regularly and, in the event of material changes in their risk profile, without delay. The own risk and solvency assessment must form a fixed part of the undertaking's business strategy and must continuously feed into its strategic decisions. Insurance undertakings must inform the supervisory authority of the result within 14 days of completing each own risk and solvency assessment carried out.
(2) The own risk and solvency assessment comprises at least 1. an own assessment of the overall solvency needs, taking into account the specific risk profile, the approved risk tolerance limits, and the business strategy of the undertaking, 2. an assessment of the continuous compliance with the regulatory own-funds requirements, the requirements for technical provisions in the solvency and financial condition report, and the risk-bearing capacity, and 3. an assessment of the significance with which the risk profile of the undertaking deviates from the assumptions underlying the Solvency Capital Requirement calculated with the standard formula or with the internal model.
(3) For the assessment under subsection (2), point 1, undertakings must have processes appropriate to the nature, scale, and complexity of their risks that allow them to properly identify and assess all risks to which they are or could be exposed in the short and long term. This includes, in particular, the independent conduct of stress tests and scenario analyses.
(4) Insurance undertakings are required to explain the methods they use to assess the overall solvency needs under subsection (2), point 1.
(5) Where an internal model is used, the assessment in the cases named in subsection (2), point 3, must be carried out together with the recalibration by which the results of the internal model are converted to the risk measure and calibration of the Solvency Capital Requirement.
(6) Undertakings that provide long-term guarantees must, as part of the assessment under subsection (2), point 2, also take into account the undertaking's long-term risk-bearing capacity. Where insurance undertakings apply the matching adjustment under section 80, the volatility adjustment under section 82, or the transitional measures under sections 351 and 352, compliance with the capital requirements under subsection (2), point 2, must be assessed both with and without taking these adjustments and transitional measures into account.