Question ID: 2393
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: 189(3)
Status: Final
Date of submission: 22 Feb 2022
Question
EIOPAs response to question 2346 clarified that the 15% type 2 exposure counterparty default risk charge applies to all receivables whether overdue or not overdue. This could also be interpreted as including a charge on bound but not yet incepted business (BBNyI). For example, where premium payment terms are included in the policy and the premium is therefore due. Future premium from BBNyI business is usually included in the technical provisions (Premium Provision). For non-life business, this future premium for BBNyI is shocked under the non-life lapse module (at 40%). Can EIOPA clarify that future premium from BBNyI business should not receive another shock under the Counterparty default risk module?
Background of the question
Clarification request on EIOPA response to Q&A 2346 since the EIOPA response there could be read as requiring future premium from BBNI business to be shocked under the counterparty risk module as well as the non-life lapse risk module. This literal reading may not be what EIOPA intended when responding to Q&A 2236.
EIOPA answer
As noted in the question, future premiums that are within the contract boundary of the technical provisions would be expected to be included within the calculation of the lapse risk submodule.
Article 189(3) of the Delegated Regulation (EU) 2015/35 gives examples of the credit exposures that should be included within the counterparty default risk submodule. In order to avoid double counting, element (b) 'policyholder debtors' should be taken to relate to premiums that are overdue, rather than those payable in the future.