EIOPA · 2230
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
- 182
- Topic
- Solvency Capital Requirement (SCR)
- Submitted
- 2020-12-17
- Answered
- 2021-06-11
Question
I do have a question regarding the treatment of investments in credit institutions in the market risk concentration sub-module of the Solvency II standard formula. In the "old" Delegated Acts according to Art. 186 (4) credit institutions without rating but meeting the solvency requirements was assigned a risk factor of 64,5%. Now according to Art. 182 (10) credit institutions without rating is assigned a Credit Quality Step of 3,82. Imagine a single name exposure consisting only of one investment in an unrated credit institution. Is it correct, that the Credit Quality Step of this SNE is rounded up to 4 in the first step (Art. 182 (4)) and then a risk factor of 73% is assigned? (Art. 186 (1)). Or has a risk factor of 64,5% still to be applied?
Background
Discussion with client from insurance segment
Answer
According to 2019/981 Delegated Regulation, Art. 186 (2-6) of 2015/35 Delegated Regulation are deleted, so Article 186 (4) of 2015/35 Delegated Regulation, mentioned in the question, no longer applies. Therefore, in the given example, the first proposed approach should be applied, i.e. adopting a CQS equal to 3.82 (in accordance with the new Article 182 (10)), rounding the CQS to level 4 (in accordance with Article 182 (4)) and selecting a risk factor of 73% (as defined in Article 186 (1)).
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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