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Question

We are referring to the formula V_prem,s=max(P_s; P_last,s)+FP_existing,s+FP_future,s and would like to clarify the recognition of an additional reinsurance treaty for the next 12 months:
Example:   P_last,s = 100   P_s         = 110   Result of max(P_s; P_last,s) = 110
New Quota 50 % for the next 12 month (01.01. -31.12.) for derisking based on a decision of AMSB
Our Question:Does the quota share lead to   a)    Result of max(P_s; P_last,s) = 100or can Article 116/4 be applied, meaning that the volume measure for premium risk can be derived based on the following formula   b)    V_prem,s = P_s + FP_existing,s + FP_future,s = 55 + FP_existing,s + FP_future,s
In other words: Does the quota share reduce the volume measure as by article 116/4?

European Insurance and Occupational Pensions Authority · Accepted Answer

The answer does not cover the question of what impact could a change in the reinsurance programme have on the values FP(existing,s) and FP(future,s). The answer is based on the following assumptions: 1. The reinsurance contract mentioned in the question meets the requirements in Articles 209, 210, 211 and 213 of Commission Delegated Regulation (EU) 2015/35. 2. The requirements in Article 116(4) Commission Delegated Regulation (EU) 2015/35 are met 3. The estimate Ps=55 of the premiums to be earned by the insurance or reinsurance undertaking in the segment s during the following 12 months is determined in accordance with Article 116(5) In this case, V(prem,s) can be indeed determined as 55+FP(existing,s)+FP(future,s) in accordance with Article 116(4).

1254

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