Basel vs. Solvency

[shamrock]

Hi.

Can someone please confirm if either Basel or Solvency account for diversification benefits? I have encountered varying answers to this question. The 2014 GARP Practice Exam had a question on diversification and the correct answer was that Basel II IMA for Market Risk accounts for diversification benefits. I know that Basel II and Basel III Credit and Operational Risk do not have diversification benefits, but does Solvency have it?

Thank you.

 

[ShaktiRathore]

http://www.vwrm.rw.fau.de/Comparison_2011-10-24_WP.pdf
Thanks

 

[shamrock]

Thank You!

 

[afterworkguinness]

As far as I recall (someone please correct me if I am wrong), Basel doesn't allow diversification benefits between risk types. I don't know about Solvency's treatment though.