EIOPA · 70

70

Regulation
Guidelines on submission of information to NCAs (Preparatory phase)
Submitted
2014-07-23
Answered
2019-10-29

Question

A) For life expense risk: - Cell B7 corresponds to the absolute values after upward shock of assets. The description of this item says: "This is the absolute value of the assets subject to life expense risk, after the shock (i.e.shock as prescribed by standard formula: a % increase the amount of expenses taken into account in the calculation of technical provisions and increase in 1 percentage point to the expense inflation rate (expressed as a percentage) used for the calculation of technical provision). If A05=Y, B7 = 0". - Cell B7A corresponds to the absolute values after upward shock of liabilities. The description of this item says: "This is the absolute value of liabilities (including the loss absorbing capacity of technical provisions) subject to expense risk, after the shock (i.e a shock. as prescribed by standard formula, refer to description provided within definition to cell B7)).If A05=Y, B7A = 0". For both items, the last part of the description says that B7 and B7A has to be reported with a zero in case cell A05 is reported as "Y" (A05 identifies whether the undertaking used simplifications for the calculation of life expense risk). B) For lapse risk (increase of lapse rate):  - Cell B4 corresponds to the absolute values after shock of assets. The description of this item says: "This is the absolute value of the assets subject to the risk of an increase in lapse rates, after the shock (i.e. permanent increase in the lapse rates).If A04=Y, B4 is calculated using simplified calculation for lapse rates". -Cell B4A corresponds to the absolute values after shock of liabilities. The description of this item says: "This is the absolute value of liabilities (including the loss absorbing capacity of technical provisions) subject to the risk of an increase in lapse rates, after the shock (i.e. permanent increase in the lapse rates).If A04=Y, B4A is calculated using simplified calculation for lapse rates".  For both items, the last part of the description says that if cell A04 is reported as "Y" (A04 identifies whether the undertaking used simplifications for the calculation of lapse risk), both B4 and B4A are calculated using simplifications . However it does not indicate than the value for B4 or B4A needs to be zero when A04 is equal to "Y". Therefore it looks like there are different criteria for the reporting of assets and liabilities after shocks when a simplified calculation is involved in the process.Could you confirm what needs to be reported in the stressed value of assets and liabilities when the undertaking is using simplified calculations? Is it zero or a value different to zero?

Answer

There is a mistake in the LOG of template S.26.03. In fact for the cells that represent values of Assets and Liabilities after shock for both the life expense risk and lapse risk (B4 to B7, B4A to B7A and B4B to B7B) the values should be reported as “0” if simplifications are used, as defined in SCR.7.56., SCR.7.57., SCR.7.66. and SCR.7.67. of the Technical Specifications. The use of those simplifications imply alternative calculations to the calculation of the shocks.  This will be amended in the Reporting Technical Standard.

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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