EIOPA · 2855

Solvency Capital Requirement (SCR)

Name: Solvency Capital Requirement (SCR): EIOPA Q&A — EU Financial Regulatory Q&A
Creator: European Insurance and Occupational Pensions Authority
License: https://creativecommons.org/licenses/by/4.0/

Regulation: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Article: 176
Topic: Solvency Capital Requirement (SCR)
Submitted: 2023-11-06
Answered: 2024-03-05

Browse EIOPA Insurance Register → More Q&As on this regulation →

Question

Which type of duration should be used for variable interest rate securitisations?

Background

In Article 176(2) of Commission Delegated Regulation (EU) 2015/35 (DR), the duration of variable interest rate bonds or loans is defined as follow "For variable interest rate bonds or loans, duri shall be equivalent to the modified duration of a fixed interest rate bond or loan of the same maturity and with coupon payments equal to the forward interest rate". However, in the article 178(2), we cannot find a similar definition of the type of duration to be applied for variable interest rate securitisations.

Answer

Consistent with Article 176(2) DR, the modified duration (duri) for variable interest rate securitisations should be equivalent to the modified duration of a fixed interest rate securitisation of the same maturity and with coupon payments equal to the forward interest rate.

View original on European Insurance and Occupational Pensions Authority ↗

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.