Question ID: 1146
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Article: 107
Status: Final
Date of submission: 04 Feb 2019
Question
Could you please provide me with your opinion on the following issues regarding the simplifications introduced via Article 107:
a) Does variable "Recoverables(i)" includes also receivables from counterparty i (i.e. amounts past due by reinsurers and linked to reinsurance business that are not included in reinsurance recoverables)?
b) How the capital requirement for paragraph 2, letter b is calculated? Wording of the paragraf refer to "capital requirement for underwriting risk". Does it mean capital requirement for life, non-life and health udw risk where indivudial capital requirements (i.e. life udw, non-life udw and health udw) are agregated via correlation matrix? Or the simple summation of the individual udw risks should be applied?
c) Level 2 does not explicitaly offer such possibility but are companies allowed to use simplification in a modified way? I was thinking about calculation of RMre,all value and split it to individual counterparties in a different way than suggested by paragraph 1 of Article 107.
d) Last but not least, imagine a situation amount of Recoverables(i) (excluding receivables as mentiond under point a)) is negative. Do you have any suggestion how to proceed in this case or does it mean we are not allowed to use this simplification?
EIOPA answer
Questions b to d were classified as category 1 and are therefore answered by the Commission.
Answer question a: "The calculation of the variable "Recoverables(i)" should not take into account amounts that are excluded from the calculation of the amounts recoverable from reinsurance as specified in Article 41 of the Delegated Regulation
(b) The (hypothetical) capital requirement for underwriting risk is aggregated using the correlation matrices of the standard formula.
(c) In accordance with Article 111(1)(l) of the Solvency II Directive, only the simplifications provided for in the Delegated Act can be used for the purpose of calculating the standard formula. Modifications to these simplifications are not possible.
(d) The Commission is proceeding with the adoption of an amendment to the Solvency II Delegated Act under which only positive recoverables can be included in the calculation provided for in Article 107 and 108.