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European Insurance and Occupational Pensions Authority

44

Q&A

Question ID: 44

Regulation Reference: Guidelines on submission of information to NCAs (Preparatory phase)

Article: 35, 72

Template: S.23.01

Status: Final

Date of submission: 14 Aug 2014

Question

Please, could you verify the formulae in cells C50 (OF-B1Q LOG-S.23.01.a.b) and C50A (OF-B1Q-L-S.23.01.f.g) ?

Cell C50 (or mutatis mutandis C50A) refers to "Total eligible own funds to meet the SCR – tier 1 restricted items". The formulae stated in that cell is:
C50=MAX(0,(MIN(B50*0.25, C46)))

However, as prescribed in paragraph 3 of Article 72 EOF1 from the Draft Delegated Acts as at 10 January 2014 (or any other previous version) [see background information], these basic own-fund items shall make up less than 20 %.

If my review is right, the formulae for cell C50 should be MAX(0,(MIN(B50*0.20, C46))).
Please, Would you mind reviewing my interpretation and, if I am right, amend the typo in cells C50 and C50A?

EIOPA answer

The formula in in fact correct.
C50=MAX(0,(MIN(B50*0.25, C46)))

The objective is to define the amount of eligible restricted Tier 1 to cover the SCR.

The relevant cells are:
C50 - Total eligible own funds to meet the SCR – tier 1 restricted items
B50 - Total eligible own funds to meet the SCR – tier 1 unrestricted  items
C46 - Total available own funds to meet the SCR – tier 1 restricted items

Article 72 of the draft delegated acts defines how certain Tier 1 items are restricted in relation to the total amount of eligible Tier 1 own funds, (up to a maximum of 20%).  

The formula for C50 is derived from B50 and not from total amount of eligible Tier 1 items, which is why it is not 20%. 

So to define the amount of restricted eligible Tier 1 items we need to assess the relationship between the restricted and unrestricted Tier 1 items. This lead us to the formula C50 <= 25% * B50 (restricted T1 <= 25% of unrestricted T1). 
So C50 has a maximum (B50 * 0.25) even if C46 is higher due to the operation of the limit in Article 72. C50 would equal C46 where C46 is lower than (B50 * 0.25).