EIOPA · 2371
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), Guidelines on look-through approach
- Article
- 84 and 88 of Delegated Regulation (EU) No 2015/35
- Topic
- Solvency Capital Requirement (SCR)
- Submitted
- 2021-12-13
- Answered
- 2022-07-01
Question
How should cash (bank account) in the funds via look through be treated from SCR perspective? We see funds keeping a certain amount of cash which varies greatly from quarter to quarter and is temporary from perspective of the fund's strategy, however look through reporting templates usually leave it out the SCR modules pertinent to the fund's strategy. Do insurers have to add the cash exposure in the funds in the calculation of the capital charge under the counterparty module?
Answer
As cash holdings are exposed to risk of counterparty default, undertakings should include these where look-through is being applied, as Article 84 of the Delegated Regulation (EU) 2015/35 does not exclude cash from the underlying assets that should be the basis of the SCR calculation. If look through is not possible and Article 88 is complied with, Article 84 (3) allows the undertaking to calculate the SCR based on the target underlying asset allocation or the last reported asset allocations. See Q&A 2263 for a clarification which deposits should be in the scope of the counterparty default risk module and which should be in the scope of the spread risk sub-module.
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.
Similar Q&As
More Q&As on this topic
📋 Track EU financial regulation continuously
Forseti monitors EU financial regulation and delivers personalised alerts anchored to verified official sources.
14-day free trial. No credit card required.