Question ID: 358
Regulation Reference: Guidelines on loss-absorbing capacity of technical provisions and deferred taxes
Article: 335
Status: Final
Date of submission: 24 Aug 2015
Question
GL 22 of the “loss-absorbing capacity” guidelines provides a formula with which the participating insurance and reinsurance undertaking, the insurance holding company or the mixed financial holding company should calculate the adjustment for the loss-absorbing capacity of deferred taxes.
In the case where the group SCR is greater than the sum of the solo SCR, then the group LAC DT is greater than the sum of the solos LAC DTs. Could you confirm that it should not be the case, and that the group adjustment should not be greater than the sum of the solo adjustments?
EIOPA answer
We confirm that the adjustment for loss-absorbency of deferred taxes at group level should not exceed the sum of the adjustments for loss absorbency of deferred taxes of the insurance and reinsurance undertakings consolidated in accordance with Article 335(1)(a),(b) and (c) of the Implementing Measures.
In particular, EIOPA would like to confirm that the ratio used in the formula of GL 22, such as in other formulas (e.g. calculation of the contribution to the group SCR for the assessment of non-available own funds according to the Technical Annex 1 of the Group Solvency Guidelines), should be always less or equal to 1.
Therefore, in the case where the SCR diversified (numerator) calculated in accordance to art 336(a) of the Delegated Regulation is greater than the sum of the individual SCR of the participating undertaking and each related insurance and reinsurance undertaking included in the calculation of the SCR diversified (denominator) the value of the ratio is capped to 1.