Simplified calculation of the risk mitigating effect for proportional reinsurance arrangements

Where both Article 88 is complied with and the best estimate of amounts recoverable from a proportional reinsurance arrangement and the corresponding debtors for a counterparty i is not negative, insurance and reinsurance undertakings may calculate the risk-mitigating effect on underwriting risk j of the proportional reinsurance arrangement for counterparty i referred to Article 196 as follows:

(Recoverables i / (BE - Recoverables all)) * SCR j

where:

(a) BE denotes the best estimate of obligations gross of the amounts recoverable,

(b) Recoverables i denotes the best estimate of amounts recoverable from the proportional reinsurance arrangement and the corresponding debtors for counterparty i,

(c) Recoverables all denotes the best estimate of amounts recoverable from the proportional reinsurance arrangements and the corresponding debtors for all counterparties

(d) SCR j denotes the capital requirements for underwriting risk j of the insurance or reinsurance undertaking.