Question ID: 1158
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Article: 4
Status: Final
Date of submission: 20 Mar 2018
Question
I would like to kindly ask you for a confirmation of my understanding of Article 4, paragraph 4, letter (f).
I will show it on a short example:
- company nominated three ECAIs to be used for the calculation of the SCR according to the standard formula
- let's consider a situation when we need to decide on a rating of a bank ABC to be used in the SCR calculation
- ABC has following ratings (each ECAI produces :
ECAI1: AAA (CQS = 0)
ECAI2: AA (CQS = 1)
ECAI3: A (CQS = 2)
- it applies that larger the CQS, larger SCR it produces
- According to paragraph 4 of aforementioned Article I will now pick rating AAA and AA as these are two assessments generating the two lowest capital requirements.
- However, AAA produces lower SCR than AA and therefore my final pick of rating is AA (because "assessment generating the higher capital requirement of those two credit assessments shall be used")
- Final conlcusion: Rating of bank ABC used to determine SCR is "AA".
EIOPA answer
The following is based on the assumption that the relevant provisions in Title I Chapter I Section 2 of the DA are met.
When using credit assessments in accordance with Article 4 DA, where two credit assessments are available from nominated ECAIs for an item and they correspond to CQS 1 and CQS 2 respectively, the insurance and reinsurance undertaking shall use CQS 2 for the calculation of the capital requirement.