EIOPA · 2145
Solvency Capital Requirement (SCR)
- Regulation
- (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
- Article
- N/A
- Topic
- Solvency Capital Requirement (SCR)
- Submitted
- 2020-05-06
- Answered
- 2021-06-11
Question
Some instrument as subordinated notes have very long maturity date but they also have, in specific cases, First Call Date which are shorter. I would like to know if the duration set in the SCR Spread calculation can be based on the First Call Date or if it must be based on the Maturity Date (which will be more cautious) ?
Answer
According to Guideline 2 of the "Guidelines on the treatment of market and counterparty risk exposures in the standard formula" the call right should be considered in the determination of the duration. The annex of the guidelines specifies further that the duration should be determined based on expected cash flows. In this expected cash flows one would need to estimate the probability of the call.
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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