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European Insurance and Occupational Pensions Authority

81

Q&A

Question ID: 81

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

Article: 35

Template: S.25.01

Status: Final

Date of submission: 14 Aug 2014

Question

1- Can you please confirm that cells A1-A13 (&B1 – B10) include the SCR corresponding to any RFF within the company? This is implied from the design of the QRT but is not clear in the cell definitions and not mentioned in the changes LOG.
2- Can you please clarify if the SF diversification in cell A6 includes the diversification (if any) corresponding to RFF (cell A14A)? 
• If YES, then A14A should not be used in the calculation of A14C and it should be moved to the section “For information only”.
• In any case, please confirm if A14A should include any diversification obtained with Partial Internal Models when applicable.
3- In a reply to a previous question published in this Q&A (see Q&A 32), it was mentioned that cell A14C should be calculated according to the following formula: A14C = A10 + A13 – A11 – A12 +A14A. A couple of issues with this formula:
• you should not be deducting the LACTP and the LACDT from the net BSCR (A10) but from the gross BSCR (B10)
• depending on your answer to question 2, cell A14A might need to be deleted from the formula. Ie, if the global SF diversification (A6) already includes the corresponding diversification for RFF, then it is already implicit in A10 and does not need to be added again.
4- In relation to QRT for RFF/remaining part (S.25.01.l), it does not have the same design as S.25.01.b with respect to the reporting of SF and Partial internal model elements. There is confusion on the definitions of cells A1-A13 (&B1 – B10): are they meant to include the part of the SCR calculated with PIM? 
• If YES, then you cannot use the same definitions as for the same cells in S.25.01.b. 
• If NO, where are SCRs calculated with PIM reported in this QRT?
• Please confirm that cell A31 is the SCR for the RFF/remaining part, calculated either with SF or with SF/PIM.
5- Cells A14B and A14 are defined to be the SCR of all RFFs and the SCR of the remaining part, respectively. Please confirm that these are the total SCR calculated either with SF or with SF/PIM.
6- We would understand that cells A14B and A14 complement each other, ie, if cell A14B is the SCR of all RFFs then the “remaining part” should be defined as anything that is not RFF. Please confirm. The issue arises from paragraph 3.99 in the Guidelines where the following is stated:
“3.99. EIOPA would like to clarify that the requirements do not cover the aggregation of the “other” material RFFs. The requirement is to report in relation to the major material RFFs and the remaining part, being the remaining part the “non-RFFs” business and the non-material RFFs of the undertaking.”

We do not understand what this means and how it fits into the QRTs design. Can you please clarify the definition of “remaining part” and confirm that it is consistent across the whole set of QRTs.

EIOPA answer

In the template S.25.01.b cells A1-A13 (&B1-B10) should reflect the SCR of the undertaking calculated as a whole. Therefore, the SCR should include the SCR corresponding to any RFF. 

2- No, the diversification between ring fenced funds and between ring fenced funds and remaining part would have been to be reported only in cell A14A. However, following the latest draft of the delegated act, the Technical specifications, in paragraph SCR.10.37 indicates that no diversification benefits among ring-fenced funds and/or between ring-fenced funds and the rest of the undertaking are reflected in the calculation other than in respect of ring-fenced funds under Article 304 of Directive 2009/138/EC and where conditions specified in that Article are met. 
Cell A9 should reflect only the diversification between the SCR calculated using the SF and the SCR calculated using the internal model, if any. 

3- Cell A10 should be A10 = sum (A1….A7), and it includes in fact the loss absorbing capacity of technical provisions. As a consequence A14C should be = B10 + A13 + A11 + A12 +A14A. 
Please note that the formula is now adding the loss-absorbing capacity of technical provisions, as negative values can now be entered into the cells. 
                                                                                                  
4- Template S.25.01.l should include only the calculations made using the standard formula. 
When the undertaking calculates the SCR of RFFs using internal models, as stated in para. 4.58 of Guideline 15, the notional SCR for material Ring Fenced Funds and the remaining part, should be taken into account, when submitting the relevant information identified in k) and l) of Guideline 13, according to specific templates agreed with the respective national competent authority. The submission of the information by RFF/remaining part when undertaking uses an internal model is to be agreed between the undertaking and the NSA. 

5- According to the LOGs, cells A14B and A14 should show only the amounts calculated using the standard formula. 

6- In a Solvency II environment, the statement would be correct. However, for the preparatory phase EIOPA did not required the submission of information for all material RFFs but only for the one with the most material SCR as per paragraph 1.55 of Guideline 15. In case several material RFF exist in an undertaking, it means that SCR B2A has to be fulfilled for the entity as a whole, the RFF with the most material SCR and the remaining part. However, all nSCRs need to be calculated by the undertaking. Therefore, in the preparatory phase cell A14B in the template submitted at entity level will reflect the SCR for all material RFFs, even if only the detail of SCR B2A will be transmitted for only the RFF with the most material SCR. Furthermore, the concept of “remaining part” in the preparatory phase and in future Solvency II environment is the same, therefore cell A14 should reflect the SCR for the remaining part, i.e. non-material RFF and non-RFF business. 
Regarding the specific cases where the RFF calculations are done using a partial internal model EIOPA is still discussing the approach to take and will make it clear in the Reporting Technical Standard to be publicly consulted in December 2014.