EIOPA · 1408
1408
- Regulation
- (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
- Article
- 192
- Submitted
- 2018-04-23
- Answered
- 2019-09-06
Question
In Article 192, the wording indicates that the LGD is calculated at contract level. Therefore, for a single counterparty, the floor by zero is applied for each related contract, and a gain following the default can not compensate a loss.
However, in helpertab, the floor at zero is applied per counterparty.Which one of the interpretations is the right one?
Answer
The floor in Article 192(3) of Commission Delegated Regulation (EU) 2015/35 has to be applied per derivative contract. In case of contractual netting agreements insurers can consider the collected collateral by dividing the collected collateral between the contracts.
Please be aware of the proposals that EIOPA made on the calculation of the risk-mitigating effect and the loss-given-default on derivatives – See paragraphs 1450 to 1457 in EIOPA's second set of advice to the European Commission on specific items in the Solvency II Delegated Regulation (https://www.eiopa.europa.eu/sites/default/files/publications/consultati…)
This Q&A is published by European Insurance and Occupational Pensions Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.
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