Question ID: 98
Regulation Reference: Guidelines on submission of information to NCAs (Preparatory phase)
Article: 35
Template: S.27.01
Status: Final
Date of submission: 23 Jul 2014
Question
Regarding the quantitative reporting template S.27.01 for the preparatory phase I would appreciate a confirmation on the following issue:
Cells reporting "Diversification effect arising from the aggregation of the total net/gross capital charges ..." (such as A7, C7, A16, A18, C16, C26, OG33) are to be reported as negative values. This approach has been clarified through the Explanatory text of the ERRATA on the Guidelines on Submission of Information to National Competent Authorities (paragraph 72), which modifies several formulae of Annex II.
However, the ERRATA does no mention corrections on cells reporting "Diversification effect arising from the aggregation of the risk mitigation effect ..." (such as B26, B7, HB4, KA9, KB9, LB13, MG3), maintaining the approach of Annex II of reporting these cells as positive values.
As a result, the current QRT will show some diversification effects as negative values and others as positive values which seems inconsistent.
Cound you clarify whether "Diversification effect arising from the aggregation of the risk mitigation effect ..." is to be reported as a negative or a positive value)?
EIOPA answer
EIOPA confirms that diversification effects have to be reported as a negative value if they reduce the SCR – change of the formulas in the ERRATA already reflect this approach. As for the effect of risk mitigation EIOPA confirms that the values are to be reported positive. This is mainly for traditional supervisory reasons and EIOPA believes that it is not inconsistent as the values have different nature. This decision establishes a convention for the reporting and to be applied in the formulas.
In addition all formulas will be reviewed to guarantee that they reflect the approach described.