Pillar 1 of Solvency II sets out technical provisions, which are intended to represent the current amount the (re)insurance company would have to pay, compromise two components: the best estimate of the liabilities plus a risk margin.
Solvency II is a Directive in European Union law that codifies and harmonises the EU insurance regulation. The pillar 1 framework set out qualitative and quantitative requirements for calculation of technical provisions and Solvency Capital Requirement (SCR) using either a standard formula given by the regulators or an internal model developed by the (re)insurance company. Technical provisions comprise two components: the best estimate of the liabilities (i.e. the central actuarial estimate) plus a risk margin. Technical provisions are intended to represent the current amount the (re)insurance company would have to pay for an immediate transfer of its obligations to a third party. 
