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European Insurance and Occupational Pensions Authority

2278

Q&A

Question ID: 2278

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: N/A

Status: Final

Date of submission: 09 Apr 2021

Question

Could you please clarify whether the SCR Market Risk Spread Risk module applies for all types of Deposit Instruments regardless which institution the Deposit is sitting at? Within the "Technical Specification for the Preparatory Phase (Part I)", document (EIOPA-14/209 – 30 April 2014), the SCR.5.87 section states that "The spread risk sub-module also covers the credit risk of other credit risky investments including in particular:  participating interests  debt securities issued by, and loans to, affiliated undertakings and undertakings with which an insurance undertaking is linked by virtue of a participating interest  debt securities and other fixed-income securities  participation in investment pools  deposits with credit institutions other than cash at bank as defined in Article 6 item F of Directive" Above last point mentioned it covers the deposits with credit institutions but not cash at bank. This made us wonder (1) does the SCR Spread Risk apply for all types of Deposit regardless which institution the Deposit is sitting at? (2) if not, could you provide the definition for Credit Institutions and is the Bank part of it? (3) if not, should the Deposit at Bank have any SCR spread risk applied? (4) if SCR Spread Risk does not apply for all types of Deposit, e.g. Time/Term Deposit, and Certificate of Deposit, could you provide a list of eligible Deposits?

EIOPA answer

Both “cash at bank" and “deposits with credit institutions" are terminology from Council Directive 91/674/EEC.
In particular Article 12 of that Directive says that deposits should be classified as deposits with credit institutions where there is a time restriction on withdrawal. Where there is no such restriction, those deposits should be classified as cash at bank. Therefore for SCR purposes the criterion as to whether or not a deposit should be subject to counterparty default risk or spread risk plus market risk concetration risk is whether or not there is a time restriction on withdrawal.