Question ID: 2192
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: 168, 177, 180, 184 of SII Directive; Article 4(1) of the Delegated Regulation
Status: Final
Date of submission: 16 Sep 2020
Question
In XBRL Taxonomy 2.5.0 the validations states that after 31/12 2020 the validations regarding post-brexit UK should be enabled. However we don't see any announcements regarding how UK should be considered in the standard formula after Brexit? Should it still be considered as part of EU/EEA when categorising equities and government bonds, when defining nominated ECAIs, etc?
Background of the question
We have not been able to find any statements regarding when Brexit is expented to be implemented in the Solvency II standard formula on EIOPAs og the Parliaments website. Only indicator we found is the new XBRL Taxonomy
EIOPA answer
The Standard Formula calculation should be based on the following considerations:
◦The UK is no longer a Member State
◦The UK is no longer a member of the EEA
◦The UK remains a member of the OECD
◦Status of the UK rating agencies: please see below
In accordance with Article 4(1) of the Delegated Regulation insurers may use an external credit assessment for the calculation of the Solvency Capital Requirement in accordance with the standard formula only where it has been issued by an External Credit Assessment Institution (ECAI) or endorsed by an ECAI in accordance with Regulation (EC) No 1060/2009.
As set out in Regulation (EC) No 1060/2009, a credit rating agency located in the UK (i.e. outside the Union) cannot be recognised as an ECAI. If an insurer wants to use the credit rating issued by this credit rating agency, it has to check that the credit rating was endorsed by an ECAI.
If the criteria in Article 4(1) are met, the mapping to Credit Quality Steps should be performed in accordance with Implementing Regulation (EU) 2016/1800.