Please can you provide further clarification to the EIOPA response to question 915 dated 16/02/2017.

We are specifically interested in the balance sheet presentation of reinsurance assets and the associated reinsured liabilities between two separate ring fenced funds and between a ring fenced fund and remaining part.

Guideline 15 of EIOPA’s Guidelines on Group Solvency simultaneously advises that transactions between ring fenced funds and the remaining consolidated data should be eliminated for the calculation of group own funds and that the participating insurance company should use the same assets and liabilities in calculating its ring fenced fund restriction as does the underlying ring fenced fund in calculating its notional SCR.

1) Should reinsurance balances between ring fenced funds (i.e. ring fenced fund 1 shows a gross liability and reinsurance asset of £100m and ring fenced fund 2 shows a gross liability of £100m)  be eliminated in the presentation of individual  ring fenced fund and remaining part balance sheet?

The guidance suggests that these should not be eliminated within the individual ring fenced funds balance sheet (i.e. SR.02.01.01) but the transaction shouldn’t be included within group ring fenced funds.  Please confirm whether in this example the overall group balance sheet (S.02.01.g) should have a reinsurance asset of £100m and gross liability of £200m or it should be presented on a net basis (i.e. a gross liability of £100m only). If the Group balance sheet should be presented on a net basis please clarify whether the elimination should be undertaken in the remaining part (in which case the remaining part presents a negative reinsurance asset and gross liability of £100m) or the elimination should occur within the group balance sheet only – i.e. the group balance sheet is not expected to be the sum of the individual ring fenced funds and remaining part for this particular transaction.

2) Guideline 15 advised that transactions between a ring fenced fund and the remaining part  should be eliminated on consolidation. Please describe the mechanism for this assuming that the ring fenced fund ceded £50m of gross liability to the remaining part. In this example, prior to any netting, the ring fenced fund will show a gross liability and reinsurance asset of £50m and the remaining part a gross liability of £50m. Please describe, in this instance, how the netting will be presented in the remaining part and overall group balance sheet.