EIOPA · 2052
Other
- Regulation
- (EU) No 2009/138 - Solvency II Directive (Insurance and Reinsurance)
- Article
- 197
- Topic
- Other
- Submitted
- 2019-11-07
- Answered
- 2021-05-28
Question
In Article 197(7) it is mentioned that F, F', F'' and F''' referred to in Article 192(2) to (3c) shall be 100% and in all other cases these factors shall be 50%, 18%, 16% and 90% respectively. Going through the articles (not inlcuding 192(2) to (3c)) I only find three formulas for the calculation of LGD that include the factor F, namely in Articles 194(1), 194(2) and 195. However, four values are given, 50%, 18%, 16% and 90%, for F, F', F'' and F'''. Do I understand correctly that F', F'' and F''' (having a value equal to 18%, 16% and 90% respectively) are never used in any of the articles?
Background
Delegated Regulations 2019/981
Answer
Article 197(7) sets F, F', F'' and F''' - referred to in Article 192(2) to (3c) - to be 100% only where “the determination of the insurance or reinsurance undertaking's proportional share of the counterparty's insolvency estate in excess of the collateral does not take into account that the undertaking receives the collateral". If the determination of the proportional share of the insolvency estate does take collateral into account, then the values of F, F', F'' and F''' referred to in Article 192(2) to (3c) should be set to 50%, 18%, 16% and 90% respectively.
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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