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European Insurance and Occupational Pensions Authority

1362

Q&A

Question ID: 1362

Regulation Reference: (EU) No 2015/2450 - templates for the submission of information to the supervisory authorities

Article: 35

Status: Final

Date of submission: 25 Jun 2018

Question

Should the Trigger Value or Contract Size be adjusted for an FX rate on Bond or Interest rate futures? 

EIOPA answer

Contract size" yes, while for "trigger value" see the explanation.
For futures on bonds, "contract size" is the bond nominal amount underlying the contract and it has to be filled in reporting currency. The example on the Lloyds website: https://www.lloyds.com/the-market/operating-at-lloyds/solvency-ii/information-for-managing-agents/guidance-and-workshops/reporting-and-disclosure "AAD-QAD 233 Examples 2017" shows that contract size is converted to the reporting currency with the spot exchange rate at the reporting date.

For future on bonds, "trigger value" shall be the price of the bond as percentage of the par amount. This means that the ratio calculated in the original currency of the contract or in the reporting currency of the insurer will be the same as long as the numerator and the denominator are consistent, i.e. in the same currency.

"For interest rating futures, "contract size" is the amount underlying the contract and it has to be filled in reporting currency. The "trigger value" shall be the future interest rate as percentage. This means that the interest rate in the original currency of the contract or in the reporting currency of the insurer will be the same.