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European Insurance and Occupational Pensions Authority

2013

Q&A

Question ID: 2013

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: 17 Aug 2021

Question

Can you provide detailed information on how the treat the risks associated to SPV notes held by an undertaking?

Can you confirm that the treatment as set out in the Technical Specifications for the Preparatory Phase (SCR.5.148) is still applicable?

EIOPA answer

Paragraph SCR 5.148 in the Technical Specifications for the Preparatory Phase describes one possible treatment.

A look-through approach shall always apply to Special Purpose Vehicles which are collective investment undertakings and other investments packaged as funds.  

If the notes meet the conditions listed in Article 84(4) of the Delegated Regulation, then the look through approach shall apply to market risk, underwriting risk, and counterparty risk.

If the Special Purpose Vehicle is not a related undertaking but represents an indirect exposure as referred to in Paragraph 2 then the look-through approach shall apply to market risk, underwriting risk, and counterparty risk.

Otherwise the approach should be as following, without looking through to the underlying assets:

If the notes exhibit only debt (equity) instrument characteristics, they should be included in the calculation of the capital requirement for interest rate, spread and market risk concentration risk (equity risk and market risk concentration risk).

If the notes exhibit both debt and equity instrument characteristics the approach outlined in Guideline 5 of the EIOPA Guidelines on Market and Counterparty Default Risk should be followed.