3E8 Loss-Given-Default for Pool Exposures of Type C

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Solvency Capital Requirement - Standard Formula

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3E8 Loss-Given-Default for Pool Exposures of Type C

Printed on: 23/06/2025

Rulebook at: 28/03/2025

3E8 Loss-Given-Default for Pool Exposures of Type C

For pool exposures of type C which a firm is permitted to treat as separate single name exposures in accordance with 3E2.2, the firm must calculate the loss-given-default in accordance with the following formula:

$L G D = m a x (((1 - R R_{C E}) \cdot (P_{U} \cdot B E_{C E} + Δ R M_{C E}) - F \cdot C o l l a t e r a l); 0)$

where:
(a)	P_U denotes the firm's share of the risk according to the terms of the pooling arrangement;
(b)	RR_CE is equal to:
	(i)	10% if 60% or more of the assets of the external counterparty member are subject to collateral arrangements; or
	(ii)	50% otherwise;
(c)	BE_CE denotes the best estimate of the liability ceded to external counterparty by the pooling arrangement as a whole;
(d)	ΔRM_CE denotes the external counterparty’s contribution to the risk-mitigating effect of the pooling arrangement on the underwriting risk of the firm;
(e)	Collateral denotes the risk-adjusted value of collateral provided by way of collateral arrangement held by the counterparty member of the pooling arrangement; and
(f)	F denotes the factor to take into account the economic effect of the collateral provided by way of a collateral arrangement held by the counterparty member, calculated in accordance with 3E10.

31/12/2024