Article 197 (7) of the Delegated Acts states that "Where in case of insolvency of the counterparty, the determination of the insurance or reinsurance undertaking's proportional share of the counterparty's insolvency estate in excess of the collateral does not take into account that the undertaking receives the collateral, the factors F and F' referred to in Article 192(2) and (3) shall both be 100 %. In all other cases these factors shall be 50 % and 90 % respectively."

The Article is not clear. Our understanding is that in the event of insolvency of the counterparty, if the amount that the insurer would receive from the counterparty is not reduced to allow for the fact that this collateral arrangement exists / has been paid, then the F factor can be 100%, otherwise it is 50%.  However, it is not clear how the factor could ever be 100%.   We are not sure if the terms of the collateral arrangement would need some specific references or clauses to allow this to happen or how else it could be assessed if this criteria is met.   Can you please elaborate on the assessment cirteria for using F = 100% in the case of collateral on reinsurance arrangments?

Also, can you clarify if it is the case that the F factor applies only to the residual assets of the insolvent company after the pledged collateral or to the assets of the Company including the pledged collateral?