Question ID: 1212
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Topic: Solvency Capital Requirement (SCR)
Article: 84
Status: Final
Date of submission: 12 Mar 2018
Question
When the look through approach is possible on an Alternative Investment Fund:
should the equity SCR for a Leverage Alternative Investment Fund be equal to (non Look Through Approach) MTM of Alternative Investment Fund x (49% + plus the symmetric adjustment), or
should the SCR be equal to (Look Through Approach):
MTM of Fund x Max (Leverage x (weighted sum of equity stress test of equities in the Alternative Investment Fund + symmetric adjustment), 100%)?
EIOPA answer
The answer is based on the following assumptions:
1. The alternative investment fund (AIF) holds a number of investments and has taken out debt at the level of the fund. There are no other assets or liabilities.
2. There is sufficient information available to apply the relevant sub-modules of the market risk module to the investments in the AIF and to the debt at the level of the fund.
3. No further look-through is necessary for the investments in the AIF and they belong to the type 2 equities.
It has to be emphasised that there is no capital requirement for the AIF. Instead the AIF is included in the calculation of the capital requirement for a number of sub-modules of the market risk module.
According to Article 84(1) a look-through has to be applied to the AIF. The investments have to be included in the calculation of the capital requirement for type 2 equities, market risk concentration and potentially currency risk.
The debt has to be included in the calculation of the capital requirement for interest rate risk and potentially the currency risk.