Question ID: 2119
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Topic: Solvency Capital Requirement (SCR)
Article: 134 (4)
Status: Final
Date of submission: 11 Mar 2020
Question
Article 134 (4) of DR 2015/35 states that regarding Credit CAT risk the capital requirement for recession risk shall be equal to the loss in basic own funds that would result from an instantaneous loss of an amount that is equal to 100 % of the gross premiums earned during the following 12 months. Should the gross earned premium for the exposure to recession risk be deducted for expected claims and expected direct cost as, by our understanding, loss in basic own funds should correspond to loss of profit coming from 12 months gross premium earned?
EIOPA answer
The art.134(4) of Commission Delegated Regulation (EU) 2015/35 is defining the recession risk, quantifying as a loss equals to the gross premiums earned during the following 12 months. Therefore, the amount of losses is equal to the premiums earned and not to the profits from the following 12 months.