Solvency II Standard Formula SCR: Counterparty Default Risk Module – Type 2 Risks

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The final Solvency II Delegated Act subdivides counterparty exposures into two types. Type 2 aims to cover exposures primarily of the sort which are usually diversified and where the counterparty is likely to be unrated (e.g. receivables from intermediaries or policyholder debtors). It involves a formula along the following lines:

where:

 = risk factor for type 2 exposures

 = sum of the values of type 2 exposures, except for receivables from intermediaries which have been due for more than  months

 = risk factor for past-due receivables from intermediaries

 = sum of values of receivables from intermediaries which have been due for more than  months

As with the Type 1 exposures, the impact of possible recoveries should be taken into account when assessing exposures, see loss-given-default adjustments.

Version dated 7 December 2015

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