Question ID: 280
Regulation Reference: (EU) No 2015/2450 - templates for the submission of information to the supervisory authorities
Article: 35
Template: S.08.02
Status: Final
Date of submission: 11 Nov 2015
Question
We are not quite sure, what to report in S.08.02. for profit and loss.
Credit Default Swaps
Our contract says, that we do not have to pay any aquisition costs for our CDS - we are obliged to pay quarterly premiums to our contract partner. Additionally, the premiums we paid are booked as unrealized losses at the end of every year (due to a negative market price). Therefore our book value of the CDS at the end of every year is zero, the solvency II value would be e.g. -400.000 EUR. As the definition for profit and loss to date says, it's the difference between value price at sale/maturity date and the value price at acquisition date --> it would be zero. Or shall the unrealized losses (premiums paid) be reported as loss to date?
FX-Swaps
A similar problem as with the CDS: we are not obliged to pay any aquisition costs, but only the premiums/coupons. Therefore - if the Swap was sold - we would have the difference between sale price and zero. Is that correct?
Is there a possibility to find examples for different derivatives and their calculation?
EIOPA answer
Credit Default Swaps: The premiums paid are not part of the Profit and loss to date (C0160), they are only reported in Premiums paid to date (C0140). The SII value of the contract is the market-consistent value, and if IFRSs are used, fair value as per IFRS, which should correspond to the future expected cash flows, discounted using a market discount rate for that instrument, at each valuation date.
FX-Swaps: Based on the example given it is correct but please have in mind the explanation given in the answer above.