Question ID: 759
Regulation Reference: (EU) No 2015/2450 - templates for the submission of information to the supervisory authorities
Article: 35
Template: S.26.03
Status: Final
Date of submission: 30 Aug 2016
Question
I have a follow up question to a Q&A No 00353. Your explanation is in contradiction with my earlier (2011 QRT) understanding of LOG S.26.03.
To be as clear as possible, imagine following situation:
best estimate = 100 (consist of 2 parts, one in the amount 50 increases after the mortality shock and the othe in teh amount of 50 descreases)
best estimate after the mortality shock is = 130 (however best estimate 50 drops after shock to 40, and the other 50 increases to 90).
Properly, according to level 2 text SCR = 90 - 50 = 40 (shock is applied only to contract where the shock increases technical provisions)
I am wondering what should I include to QRT Liabilities before shock (R0100/C0030):
a) 100
b) 50 (only the part of BEL that will increase after the shock)
I am aware of the fact that values of assets and liabilities before and after shock need to satisfy the validations, therefore:
- for option a) the liab. after shock (CR0100/0070) = 140
- for option b) the liab. after shock (CR0100/0070) =90
Which of the options above is correct?
EIOPA answer
In fact the concept of “sensitive to shock” may raise doubts. All answers provided until now addressed questions relating to template S.26.01 where specific situations occur.
Sensitivity to shock should be understood as a risk-increasing effect not necessarily in SCR terms but in terms of the real risk exposure. For example, European government bonds are exposed to spread and concentration risk although the SCR is 0 (the value of this assets should be reported in S.26.01 before and after shock with the same amount, i.e. they are sensitive to the risk but the shock is zero). However, contracts, whose Technical Provisions decreases when mortality increases are not sensitive to mortality risk and thus this Technical Provisions should not be entered in S.26.03.C0030/R0100, but most probably in the cell for longevity risk.