The current solvency regulatory framework Solvency II emphasizes marketconsistent valuation of liabilities; it is explicitly stated that liabilities should be “valued at the amount for which they could be … transferred or settled … between knowledgeable and willing parties in an arm’s length transaction”. Solvency assessment of an insurance company is based on future net values of assets and liabilities, and market-consistent valuation enables solvency assessments that take dependence between future values of assets and liabilities into account. Moreover, current regulatory frameworks emphasize risk measurement over a one-year period. In particular, at any given time, the whole liability cash flow is taken into account in terms of the cash flow during the next one-year period and the market-consistent value at the end of the one-year period of the remaining liability cash flow. However, liability cash flows are typically not replicable by financial instruments. Therefore, the contribution to the liability value from the residual cash flow resulting from imperfect replication must be determined. Given an aggregate liability cash flow of an insurance company, portfolios may be formed that generate cash flows with expected values matching that of the liability cash flow. The traditional actuarial practice of reserving provides an example of such a portfolio consisting of default-free bonds. In case of dependence between the liability cash flow and market values of financial instruments, more sophisticated replicating portfolios may be more suitable. However, the mismatch between the cash flow of such a portfolio and that of the original liability cash flow is typically substantial. The residual liability cash flow must be handled throughout the life of the liability cash flow by making sure that sufficient additional capital is available at all times. Capital providers, such as share holders, require compensation for providing buffer capital, which should be taken into account in the liability valuation. In particular, capital costs should be accounted for. In Solvency II, the so-called technical provisions correspond to the aggregate liability value and is defined as the sum of a best estimate, corresponding to a discounted actuarial fair value, and a so-called risk margin aimed at capturing capital costs. Unfortunately, the risk margin in the current regulatory framework lacks a proper definition and theoretical foundation, and different approximation formulas for this ill-defined object have been suggested. Criticism of the risk margin and suggestions for better notions of cost-of-capital margins or market-value margins are found in e.g. [11], [13], [17], [20] and [24].