Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (Text with EEA relevance) (c. 35)

TITLE I U.K. [X1 VALUATION AND RISK-BASED CAPITAL REQUIREMENTS (PILLAR I), ENHANCED GOVERNANCE (PILLAR II) AND INCREASED TRANSPARENCY (PILLAR III)]

CHAPTER V U.K. SOLVENCY CAPITAL REQUIREMENT STANDARD FORMULA

SECTION 6 U.K. Counterparty default risk module

Subsection 1 U.K. General provisions

Article 194 U.K. Loss-given-default for pool exposures of type B

1. For pool exposures of type B which the undertaking considers as separate single name exposures in accordance with Article 190(2), where members are each liable up to the full amount of the obligation covered by the pooling arrangement, the loss-given-default shall be calculated as follows:

where:

(a)

P_U denotes the undertaking's share of the risk according to the terms of the pooling arrangement;

(b)

P_C denotes the counterparty member's share of the risk according to the terms of the pooling arrangement;

(c)

RR_C is equal to:

(i)

10 % if 60 % or more of the assets of the counterparty member are subject to collateral arrangements;

(ii)

50 % otherwise;

(d)

BE_C denotes the best estimate of the liability ceded to the counterparty member by the undertaking, net of any amounts reinsured with counterparties external to the pooling arrangement;

(e)

ΔRM_C denotes the counterparty member's contribution to the risk-mitigating effect of the pooling arrangement on the underwriting risk of the undertaking;

(f)

Collateral denotes the risk-adjusted value of collateral held by the counterparty member of the pooling arrangement;

(g)

F denotes the factor to take into account the economic effect of the collateral held by the counterparty member, calculated in accordance with Article 197.

2. For pool exposures of type B which the undertaking considers as separate single name exposures in accordance with Article 190(2), where members are each only liable up to their respective portion of the obligation covered by the pooling arrangement, the loss-given-default shall be calculated as follows:

where:

(a)

P_C denotes the counterparty member's share of the risk according to the terms of the pooling arrangement;

(b)

RR_C is equal to:

(i)

10 % if 60 % or more of the assets of the counterparty member are subject to collateral arrangements;

(ii)

50 % otherwise;

(c)

BE_U denotes the best estimate of the liability ceded to the pooling arrangement by the undertaking, net of any amounts reinsured with counterparties external to the pooling arrangement;

(d)

ΔRM_C denotes the counterparty member's contribution to the risk-mitigating effect of the pooling arrangement on the underwriting risk of the undertaking;

(e)

Collateral denotes the risk-adjusted value of collateral held by the counterparty member of the pooling arrangement;

(f)

F denotes the factor to take into account the economic effect of the collateral held by the counterparty member, calculated in accordance with Article 197.

Editorial Information

X1 Substituted by Corrigendum to Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (Official Journal of the European Union L 12 of 17 January 2015).