EIOPA · 1800
1800
- Regulation
- (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
- Article
- 188
- Submitted
- 2019-03-04
- Answered
- 2019-09-12
Question
Article 188 of the SII Delegated Acts covers currency risk but only refers to different charges where currencies are pegged to the Euro. We are a US dollar functional currency entity and we are currently taking capital charges on currencies that are pegged to the USD which seems very punitive. For example on AED at Q3 our SCR currency risk charge amounted to $8m. Given AED is pegged to the USD we do not put hedging programs in place for these currencies. Why is there no allowance for the pegging of foreign currencies to the local currency when it is not Euro?
Answer
Please note that Solvency II only gives allowance for the pegging of foreign currencies to Euro.
This is elaborated in Article 188(5) of Commission Delegated Regulation (EU) 2015/35, as well as the Commission Implementing Regulation (EU) 2015/2017 of 11 November 2015 which establishes factors for currency risk for currencies pegged to the euro.
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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