Question ID: 2855
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: 176(2)
Status: Final
Date of submission: 06 Nov 2023
Question
Which type of duration should be used for variable interest rate securitisations?
Background of the question
In Article 176(2) of Commission Delegated Regulation (EU) 2015/35 (DR), the duration of variable interest rate bonds or loans is defined as follow "For variable interest rate bonds or loans, duri shall be equivalent to the modified duration of a fixed interest rate bond or loan of the same maturity and with coupon payments equal to the forward interest rate".
However, in the article 178(2), we cannot find a similar definition of the type of duration to be applied for variable interest rate securitisations.
EIOPA answer
Consistent with Article 176(2) DR, the modified duration (duri) for variable interest rate securitisations should be equivalent to the modified duration of a fixed interest rate securitisation of the same maturity and with coupon payments equal to the forward interest rate.