EIOPA · 2284
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
- 192
- Topic
- Solvency Capital Requirement (SCR)
- Submitted
- 2021-04-28
- Answered
- 2021-04-28
Question
If you are unable to determine from your reinsurer whether they have more than 60% of their assets tied up in collateral, are you required to use prudence and assume they have, resulting in the lower recovery rate and higher SCR, or can you still assume the 50% recovery rate as this is best practice (as stated in the counterparty SCR calibration document)
Background
We've had insurers query what approach they should use when they cant obtain this information from their reinsurer.
Answer
The formula in Article 192(2) first subparagraph of the Commission Delegated Regulation (EU) 2015/35 can only be used if the conditions in the second subparagraph are not met.
If it cannot be established whether or not the conditions in the second subparagraph are met, the formula in Article 192(2) first subparagraph cannot be used.
Where Article 88 of the Commission Delegated Regulation (EU) 2015/35 is complied with, insurance or reinsurance undertakings may calculate the loss-given-default on a reinsurance arrangement according to the formula in Article 112a of the of the Commission Delegated Regulation (EU) 2015/35.
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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