818

Guidelines on application of outwards reinsurance’s Introduction 1.15 clarify among others the definitions of the “Gross loss” (=> indication/hint of the treatment of inuring diversifications): i.    “For risk mitigation being applied in a sub-module which has no dependency on other sub-modules, the loss calculated according to the formula in this sub-module;ii.    For risk mitigation being applied in a sub-module which does have a dependency on other sub-module(s), the loss calculated according to the formula in this sub-module but using, as inputs to the formula, the results from each sub-module net of risk mitigation applied (if any) in the sub-modules on which this sub-module depends.”(Source: https://eiopa.europa.eu/Publications/Guidelines/Outwards_Re_GLs_EN.pdf) Identifying the “inuring” diversifications is complex. Nevertheless the materiality of these “inuring” diversifications has to be identified. If material, the undertaken has to model after diversification; If non-material, the undertaken doesn’t have to model the diversification and it has to document this simplification accordingly.