Background and Request for Clarification – Market Concentration Risk under Solvency II We are assessing the application of the Market Concentration Risk module under Solvency II for two insurance undertakings, A and B, both with total assets exposed to the Market Concentration Risk module amounting to EUR 100 million. Company A has an investment of EUR 30 million in a covered bond via a single custodian who only has access to the ISIN as the only identifier. Furthermore, they have a corporate bond with the same issuer: Asset ID SII Value Issuer Group CIC CQS XV0123456789 EUR 30m Issuer 1 XV27 0 YZ9876543210 EUR 3m Issuer 1 XV21 2 Company B holds the exact same security (ISIN: XV0123456789), which is split equally across two custodians who do not have access to the same identification codes. In this case, the second custodian only has access to a Bloomberg ticker, say "CICXV27 EUR Corp". It also holds the regular bond from earlier with the same issuer as well: Asset ID SII Value Issuer Group CIC CQS XV0123456789 EUR 15m Issuer 1 XV27 0 "CICXV27 EUR Corp" EUR 15m Issuer 1 XV27 0 YZ9876543210 EUR 3m Issuer 1 XV21 2 To elaborate the two undertakings have exactly the same investments except from the fact that Company B makes use of two custodians whereas Company A just uses one. The concentration risk threshold is 15% of the total assets for the covered bonds with CQS=0 and 3% for the corporate bond with CQS=2. According to EIOPA's response to Question 3330, it is clear that the use of two custodians cannot reduce the concentration risk. Hence, in both cases 30 million must be exposed to covered bonds as Company B is having the same investments as company A - just split on 2 custodians. In any case we therefore calculate a concentration risk contribution of 12% * max(0; 30 mEUR - 100mEUR * 15%) = 1,8mEUR. The corporate bond does not contribute as this exposure just equals the threshold. Questions for clarification: Does the use of multiple identification code affect the calculation of concentration risk under the Market Concentration Module? Specifically, can an undertaking (intendedly or unintendedly) reduce or avoid a concentration risk charge by splitting an investment across multiple identification codes, even if the exposure relates to the exact same security and/or issuer group? If undertakings are supposed to aggregate the above exposures appropriately to avoid treating undertakings differently only due to the use of several custodians, how should this be done?