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European Insurance and Occupational Pensions Authority

80

Q&A

Question ID: 80

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

Article: 35

Template: S.26.01

Status: Final

Date of submission: 04 Feb 2015

Question

In SCR-B3A LOG-S.26.01, SCR-B3C LOG-S.26.03 and SCR-B3D LOG-S.26.04, what recoverable from reinsurance shall be displayed in column "asset values after shock"? 
BE from recoverables including the loss absorbing capacity of technical provisions? Or BE from recoverables excluding the loss absorbing capacity of technical provisions? 

Let's take the example of cells C1 and D1 in SCR-B3C-S.26.03.b. How can both formulas be accurate if they refer to the same column B1? Indeed, the assumption of loss-absorbing capacity of technical provisions may have an impact on shocked BE of recoverable. 

EIOPA answer

The Recoverables shall be calculated following the relevant articles of the delegated act. They should be calculated based on the expected cash-flows and adjusted for the expected losses due to default of a counterparty. Under templates S.26. the recoverables are not to be considered as Assets but should be considered as a reduction of liabilities. 
For instance, in template S.26.03 the Liabilities to be reported under A1A, B1A, B1B should be net of reinsurance, i.e. net of recoverables. 
 
The formulas as indicated in C1 and D1 of S.26.03.b are correct as they are not the same. C1=(A1-A1A)-(B1-B1A) and D1=(A1-A1A)-(B1-B1B). As underlined, C1 deducts the Liabilities (including the loss absorbing capacity of technical provisions) while for D1 the deduction I of the Liabilities (excluding the loss-absorbing capacity of technical provisions).