1371

Question

According to article 182 et seq of the Delegated Acts, a Company "C" which owns (and / or lends money to) subsidiaries which are not consolidated in accordance with Article 335(1)(a) seems to be required to:i) Sum the fair value of all its exposures (equity, debt etc.) to non consolidated subsidiaries in order to quantify its overall exposure to "C"; let's call such overall exposure "e"ii) quantify the amount of "Assets" according to Article 184 ("a")iii) quantify the market exposure threshold percentage according to Article 185 ("t%")iv) quantify the market exposure threshold value ("t"=”a”*”t%”)v) determinate a capital charge percentage according to Article 186 ("p%"), depending on the Company’s own Solvency Ratiovi) quantify the SCR Market Risk Concentration (with reference to "C"): SCR Market Risk Conc = (“e” - “t”) * p%”, which contributes to the Company's overall SCR.
Is this procedure correct, or subsidiaries not consolidated in accordance with Article 335(1) should be excluded from the Market Risk Concentration?

European Insurance and Occupational Pensions Authority · Accepted Answer

The described procedure is not correct.In the following it is assumed that the insurance or reinsurance undertaking has exposures to several non-consolidated subsidiaries that are not excluded from the scope of the market risk concentration sub-module in accordance with Article 184(2) of Delegated Regulation (EU) 2015/35 and that constitute a single name exposures.As the single name exposure consists of exposures to different legal entities Article 186(2) is not applicable.The credit quality step for the individual exposure should be determined in accordance with Article 186(1) or Article 186(6) of Delegated Regulation (EU) 2015/35 as applicable.On this basis the further calculations described in Article 182(4), 185, 184 and Article 183 should be performed.

1371

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