Regarding the Article 38 - Reference Undertaking (Paragraph 1b). The delegated act 2015/35: "...where the original undertaking simultaneously pursues both life and non-life insurance activities according to Article 73(5) of Directive 2009/138/EC...". Our Client only sells Non life contracts, but in this contracts an annuity is embedded, Line of business 34 in the Delegated Regulation Annex 1( ‘Annuities stemming from non-life insurance contracts and relating to insurance obligations other than health insurance obligations’). I understand by pursuing non-life insurance activities, the company does not need to divide the Best Estimate Net run off for the calculation of the Risk Margin by life and non-life even though we have a life LoB. On the other side, we could think because we have LoB for life and non- life this should be divided as the delegated act. 

EIOPA answer

Article 73(5) of the Directive is about the situation where an undertaking is pursuing both life and non-life lines of business, and does not seem to apply here. Therefore the calculation of the risk margin does not need to be split into two separate reference undertakings.

However, even within a single reference undertaking, the calculation of the risk margin needs to assess the present value of all future SCRs – either through a full projection, or by utilisation of a simplified method as permitted in Article 58 of the Delegated Regulations (including those set out in Guideline 62 of the Guidelines on the Valuation of Technical Provisions).

We note that it is important for any undertaking using a simplified method to have regard to Article 56 when considering whether or not a method is proportionate. In particular, in deciding whether or not it is necessary to divide the Best Estimate Net run off for the calculation of the Risk Margin by life and non-life, an undertaking should carry out an assessment which includes an evaluation in qualitative or quantitative terms of the error introduced in the results of the simplified method.