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European Insurance and Occupational Pensions Authority

2331

Q&A

Question ID: 2331

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: 168(6)(c)

Status: Final

Date of submission: 15 Sep 2021

Question

When applying 39% equity type 1 capital charge for EUR denominated funds that meet unleveraged closed-ended AIF definition domiciled in the EU as per 168 c) on either (i) equities held within such funds where the look-through approach set out in Article 84 of this Regulation is possible for all exposures within the alternative investment fund; or (ii) units or shares of such funds where the look-through approach is not possible for all exposures within the alternative investment fund, is there still a necessity to look through to the fund to see for any potential component requiring an application of FX charge in addition to equity risk module? (The fund itself is EUR denominated, but there might be unhedged components on the level of underlying assets) Second question is, do the funds domiciled in the UK, e,g, English or Scottish LPs, still meet the domicile requirement of article 168 c)?

Background of the question

Looking for a potential investment in a new fund

EIOPA answer

Question 1:
When calculating the capital requirement for currency risk, a look-through has to be applied to funds referred to in Article 168(6) (c) of the Delegated Regulation. The equities referred to in Article 168(6)(c) are always considered as type 1 equities, id est Article 168(3) is not applicable.

Question 2:
If the funds are not established in the Union(e.g. in England or Scotland), they would have to meet the requirement of being marketed in the Union in accordance with Article 35 or 40 of Directive 2011/61/EU to qualify under Article 168(6)(c ) of the Delegated Regulation.