Question ID: 2132
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: Articles 116; 147; 1
Status: Final
Date of submission: 14 Apr 2020
Question
Article 116 (6) states that the volume measure for reserve risk shall not be a negative amount. There is no such Statement about the volume measure for premium risk in 116(3). In exceptional circumstances this could be negative. Can you clarify whether the volume measure for premium risk might be a negative amount?
EIOPA answer
The answer to this question is provided by the European Commission.
According to paragraphs 3 and 4 of Article 116 of the Delegated Regulation (EU) 2015/35, the volume measure for premium risk of a particular segment is based on the determination of premiums earned or expected to be earned during specified time periods. According to paragraph 5 of the same article, such premium amounts shall be net of premiums for reinsurance contracts (with some exceptions).
According to the definition provided in Article 1, point 12 of the Delegated Regulation (EU) 2015/35, earned premiums are "premiums relating to the risk covered by the insurance or reinsurance undertaking during a specified time period". The volume measure for premium risk is reflecting earned premiums net of reinsurance, which means that it relates to the part of the (gross) risk, which is not covered by the reinsurance contract. Therefore, the volume measure for premium risk can never be negative because the risk covered by the reinsurance contract cannot be larger than the gross risk.
The same applies also to the volume measure for premium risk for “health insurance obligations that are assigned to the lines of business for non-life insurance obligations” (NSLT), in accordance with Article 147 of the Delegated Regulation (EU) 2015/35.
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.