Question ID: 2066
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: 130(2)(3); 131; 132 (2)
Status: Final
Date of submission: 19 Nov 2019
Question
The question concerns the calculation of the marine, aviation and fire catastrophe risk sub-modules pursuant to Articles 130 to 132 of Commission Delegated Regulation (EU) 2015/35.
The calculation of each of those modules involves the determination of a maximum of a sum insured and outwards reinsurance can be taken into account.
Is it correct that the amounts recoverable by the insurance or reinsurance undertaking from reinsurance contracts and special purpose vehicles are deducted from the sum insured by the insurance or reinsurance undertaking before the maximum is determined?
If so, how is the risk-mitigating effect for a related reinsurance agreement to be calculated?
EIOPA answer
The answer to this question is provided by the European Commission.
Yes, for the calculation of each of those sub-modules the largest sum insured net of reinsurance should be determined.
The risk-mitigating effect of a reinsurance arrangement should be calculated in accordance with Article 196 of Commission Delegated Regulation (EU) 2015/35. For that purpose, a hypothetical capital requirement for underwriting risk of the insurance or reinsurance undertaking that would apply if the reinsurance arrangement did not exist, is calculated. Where a reinsurance contract covers more than one of the relevant types of insured items, it is possible that the actual capital requirement and the hypothetical capital requirement for underwriting risk are based on different insured items, namely:
- different sea, lake, river and canal vessels in the context of the risk of a vessel collision;
- different oil and/or gas offshore platforms in the context of the risk of a platform explosion;
- different aircrafts in the context of aviation risk; and/or
- different fire risk concentrations in the context of fire risk concentration.
Disclaimer provided by the European Commission:
The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies, in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.