Simplified calculations for pooling arrangements

Where Article 88 is complied with, insurance or reinsurance undertakings may use the following simplified calculations for the purposes of Articles 193, 194 and 195:

(a) The best estimate referred to in Article 194(1)(d) may be calculated as follows:

BE C = (P C/P U) * BE U

where BE u denotes the best estimate of the liability ceded to the pooling arrangement by the undertaking to the pooling arrangement, net of any amounts reinsured with counterparties external to the pooling arrangement.

(b) The best estimate referred to in Article 195(c) may be calculated as follows:

BE CE = (1/P U) * BE CEP

where BE CEP denotes the best estimate of the liability ceded to the external counterparty by the pool, in relation to risk ceded to the pool by the undertaking.

(c) The risk mitigating effect referred to in Article 195(d) may be calculated as follows:

DeltaRM CE = (BE CE/sum CE BE CE) * DeltaRM CEP

where:

(i) BE CE denotes the best estimate of the liability ceded to the external counterparty by the pooling arrangement as a whole;

(ii) ΔRM CEP denotes the contribution of all external counterparties to the risk mitigating effect of the pooling arrangement on the underwriting risk of the undertaking;

(d) The counterparty pool members and the counterparties external to the pool may be grouped according to the credit assessment by a nominated ECAI, provided there are separate groupings for pooling exposures of type A, type B and type C.