Question ID: 2484
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Topic: Reinsurance
Article: 211(2)(c)
Status: Final
Date of submission: 07 Sep 2022
Question
As per Article 211 of Commission Delegated Regulation 2015/35, an undertaking may not take into account when calculating the SCR any reinsurance cover provided by a reinsurer based in a third-country non-equivalent jurisdiction if the reinsurer’s CQS is 4 or worse. However, would the undertaking be able to take credit for the risk mitigation provided by the reinsurance cover under either of these two cases: 1. The undertaking obtained a letter of credit that fully covered the reinsurer’s obligations from an entity with CQS 3 or better (and could then apply Article 199 Paragraph 10 of the Commission Delegated Regulation 2015/35 to use CQS of the issuer of the letter of credit in the SCR calculations), or 2.The undertaking required the reinsurance cover to be fully collateralised
EIOPA answer
If a reinsurance agreement with a reinsurer from a non-equivalent third country complies with all relevant requirements in Articles 209-211 except for 211.2.c), a letter of credit issued by a counterparty with a CQS 3 or better and that fully covers the reinsurer’s obligations should be considered to meet the criteria set in Article 213.1.b). Therefore, in such a case, reinsurance cover provided by a non-equivalent third-country reinsurer with a CQS 4 or worse could be considered when calculating the Basic Solvency Capital Requirement.
If a reinsurance agreement with a reinsurer from a non-equivalent third country complies with all relevant requirements in Articles 209-211 except for 211.2.c), full collateralisation of the reinsurer’s obligations should be considered to meet the criteria set in Article 213.1.a) provided the collaterals meet the requirements in Article 214. Therefore, in such a case, reinsurance cover provided by a non-equivalent third-country reinsurer with a CQS 4 or worse could be considered when calculating the Basic Solvency Capital Requirement.