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© Reproduction in whole or in part of the content of this document and the communication thereof are made with the consent of the CEA, must be clearly attributed to the CEA and must include the date of the CEA document.
CEA aisbl
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Annex II - Practicability issues, Inconsistencies, Gaps &
Ambiguities in Draft QIS5 Technical Specifications
CEA reference: ECO-SLV-10-372 Date: 20 May 2010
Referring to: Solvency II
Related CEA documents:
Contact person: ECOFIN Department E-mail: [email protected]
Pages: 54
Valuation (Section 1)
16 of 54
-
-
SCR Standard Formula (Section 2)
23 of 54
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SCR Standard Formula (Section 2)
42 of 54
Annex
54 of 54
Calculations showing inconsistency between spread risk module calculations for corporate bonds and structured credit products. 1. Comparison Corporate Bonds held directly vs held via structured finance transaction
Rating AmountModified
Duration (years)
AAA - 10
AA - 10
A - 10
BBB - 10
BB 10 000 000.00 10
B 10 000 000.00 10
CCC - 10
Total 20 000 000.00
Insurance A
Attachment 0.00%
Detachment 100.00%
Capital Charge
40.50%
48.58%
Difference 8.08%
in EUR 1 616 500.00
a) Capital Charge if this portfolio is held directly
F(Rating) Rating class Duration Floor Duration Cap
AAA 1.30% 1
AA 1.50% 1
A 1.80% 1
BBB 2.50% 1
BB 4.50% 1 8
B 7.50% 1 6
CCC 7.50% 1 6
Unrated 3.00% 1
Rating Amount Tenure (years) Charge % Charge
AAA - 10 -
AA - 10 -
A - 10 -
BBB - 10 -
BB 10 000 000.00 10 3 600 000.00 36.00%
B 10 000 000.00 10 4 500 000.00 45.00%
CCC - 10 -
Total 20 000 000.00 8 100 000.00 40.50%
b) Capital Charge if this portfolio is held via a structured credit transaction WITH SAME ECONOMIC RISK
G(Rating…) AAA AA A BBB BB B CCC Unrated
0 0.80% 1.60% 4.70% 8.10% 20.90% 41.50% 65.90% 9.70%
2 1.60% 3.10% 8.10% 14.70% 34.10% 59.70% 83.30% 17.60%
4 2.30% 5.00% 10.90% 20.20% 43.00% 68.20% 88.40% 24.20%
6 3.50% 7.40% 14.00% 25.20% 50.40% 73.30% 90.70% 30.20%
8 4.70% 9.70% 17.10% 30.20% 56.20% 77.10% 91.90% 36.20%
R(ratingdist) AAA AA A BBB BB B CCC Unrated
Recovery Rate 50% 45% 40% 35% 30% 25% 20% 35%
Rating Amount Tenure (years) Default Recovery Default Rate Loss Rate
AAA - 10 - - 4.70%
AA - 10 - - 9.70%
A - 10 - - 17.10%
BBB - 10 - - 30.20%
BB 10 000 000.00 10 5 620 000.00 1 686 000.00 56.20% 39.34%
B 10 000 000.00 10 7 710 000.00 1 927 500.00 77.10% 57.83%
CCC - 10 - - 91.90%
Total 20 000 000.00 13 330 000.00 3 613 500.00 66.65% 48.58%
Formula:
Capital Charge 48.58%
Portfolio
SCR 4.137
SCR 4.138
SCR 4.139
a) Portfolio is held directly
b) Portfolio is held via structured credit
transaction with SAME ECONOMIC RISK
Results
i
i
struct
spAttachmentDetachment
AttachmentratingdistRratingGMVMkt
)0;))(1(...)(max(