CEIOPS' Advice for Level 2 Implementing ... - EIOPA - Europa

CEIOPS’s draft advice on the valuation of reinsurance recoverables
contained in the consultation paper on Article 86(a).
3.381 Finally, it should be noted that where this sub-section addresses the
issue of recoverables (and corresponding net valuations), this is
restricted to recoverables from reinsurance contracts, and does not
include consideration of recoverables from SPVs.
Relevant implementing measures
3.382 According to the last paragraph of Article 77(2) of the Level 1 text
“[t]he best estimate shall be calculated gross, without deduction of the
amounts recoverable from reinsurance contracts and special purpose
vehicles”.
Moreover, with respect to the reinsurance recoverables the first paragraph
of Article 81 states that
“[t]he calculation by insurance and reinsurance undertakings of amounts
recoverable from reinsurance contracts and special purpose vehicles shall
comply with Articles 76 to 80”.
Hence the Level 1 text foresees that the calculation of technical provisions
gross of reinsurance and the calculation of reinsurance recoverables (or
reinsurance assets) should be carried out separately by applying
compatible methodologies. However, Articles 76-80 of the Level 1 text
contain no direct reference to the calculation of technical provisions net of
reinsurance. 88
3.383 A similar observation can be made regarding Article 86 on implementing
measures and especially the part of this Article covering simplifications.
According to point (h) the Commission shall adopt implementing
measures laying down
“simplified methods and techniques to calculate technical provisions, in
order to ensure the actuarial and statistical methods referred to in points
(a) and (d) are proportionate to the nature, scale and complexity of the
risks supported by insurance and reinsurance undertakings including
captive insurance and reinsurance undertakings”.
3.384 In the present context it should be noted that point (h) of Article 86
refers to point (a) of the same Article which again refers back to Article
77(2). As already noted the latter Article covers only the calculation of
technical provisions gross of reinsurance. However, since the estimation
of reinsurance recoverables should comply with Article 76-80, it seems
likely that any implementing measures (including measures on
simplifications) specified for the technical provisions gross of reinsurance
will apply to the estimation of reinsurance recoverables as well. 89
3.385 From the previous paragraphs it follows that a careful reading of the
Level 1 text may lead to the conclusion that the technical provisions net
of reinsurance should be calculated as the difference between the
88 Note that within Pillar 1 of the Solvency II framework the value of technical provisions net of reinsurance will
be needed, for example as an input parameter for the determination of the SCR using the standard formula.
89 With respect to implementing measures for the reinsurance recoverables Article 86 only refers to “the methodologies
to be used when calculating the counterparty default adjustment”, cf. point (g) of this Article.
79/112
© CEIOPS 2010