Question ID: 2052
Regulation Reference: (EU) No 2009/138 - Solvency II Directive (Insurance and Reinsurance)
Topic: Other
Article: 197(7)
Status: Final
Date of submission: 07 Nov 2019
Question
In Article 197(7) it is mentioned that F, F', F'' and F''' referred to in Article 192(2) to (3c) shall be 100% and in all other cases these factors shall be 50%, 18%, 16% and 90% respectively. Going through the articles (not inlcuding 192(2) to (3c)) I only find three formulas for the calculation of LGD that include the factor F, namely in Articles 194(1), 194(2) and 195. However, four values are given, 50%, 18%, 16% and 90%, for F, F', F'' and F'''. Do I understand correctly that F', F'' and F''' (having a value equal to 18%, 16% and 90% respectively) are never used in any of the articles?
Background of the question
Delegated Regulations 2019/981
EIOPA answer
Article 197(7) sets F, F', F'' and F''' - referred to in Article 192(2) to (3c) - to be 100% only where “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". If the determination of the proportional share of the insolvency estate does take collateral into account, then the values of F, F', F'' and F''' referred to in Article 192(2) to (3c) should be set to 50%, 18%, 16% and 90% respectively.