The rule in plain words
The "Market and credit risk sum (level 2 components)" value of "mVaR 99.50%", "mVaR 99.50% w/o transitional on TP", "mVaR 99.50% w/o transitional on IR", "mVaR 99.50% w/o VA and w/o other transitionals" and "mVaR 99.50% w/o MA and w/o all the others" reported in S.26.09.04.02 Internal model - Market and credit risk for financial instruments - mVaR and VaR percentiles - including LAC TP but excluding LAC DT - each as marginal shock in the designated risk should be equal to the sum of Interest rate risk, Inflation risk, Equity risk, Property risk, Currency risk and Credit risk
The headline gives only the template and the kind of check, because the rule is too long to say in a headline. The plain words above say all of it.
What to do if your return fails it
- 01Open the table below and find the cells the rule reads.
- 02Add up the parts in your return and compare the result with the total.
- 03If they differ, a part is missing, a value sits in the wrong cell, or the total is out of date.
- 04EIOPA allows a small rounding difference, worked out from the decimals each value is reported with.
- 05It runs only when your filing indicators mark S.26.09 as reported.
- 06This is a warning. It does not stop the return on its own, but your supervisor may ask you to explain it.
The cells it reads
Internal model: market and credit risk - for financial instruments: internal model - market and credit risk for financial instruments - mVaR and vaR percentiles - including LAC TP but excluding LAC DT - each as marginal shock in the designated risk (S.26.09.04.02)
Rows
- R0010Market and credit risk sum (level 2 components)
- R0040Interest rate risk sum
- R0080Inflation risk
- R0090Equity risk sum
- R0130Property risk
- R0140Currency risk
- R0150Credit risk sum
Columns
- C0020mVaR 99.50%
- C0030mVaR 99.50% w/o transitional on TP
- C0040mVaR 99.50% w/o transitional on IR
- C0050mVaR 99.50% w/o VA and w/o other transitionals
- C0060mVaR 99.50% w/o MA and w/o all the others
A worked example
With simple numbers.
Market and credit risk sum (level 2 components) must then be 3,000.
A file that reports 3,000 passes. One that reports 3,100 fails, by 100.
The numbers are illustrative, reported to the unit, so the rounding tolerance does not change the result.
Which returns it applies to
Line4 Check runs it on annual group (ARG) return on EIOPA taxonomy 2.10.0. EIOPA applies it to annual group (ARG) returns, as a warning.
EIOPA’s own words and formula
The plain words above are EIOPA’s own, word for word, from its list of validations.
Show the formulaShowHide
EIOPA's formula. Cells are written as {t: table, r: row, c: column}.
{t: S.26.09.04.02, r: R0010, z: Z0001} = {t: S.26.09.04.02, r: R0040, z: Z0001} + {t: S.26.09.04.02, r: R0080, z: Z0001} + {t: S.26.09.04.02, r: R0090, z: Z0001} + {t: S.26.09.04.02, r: R0130, z: Z0001} + {t: S.26.09.04.02, r: R0140, z: Z0001} + {t: S.26.09.04.02, r: R0150, z: Z0001}Other rules on Internal model: market and credit risk - for financial instruments (S.26.09)
- Internal model: market and credit risk - for financial instruments: a total must equal the sum of its parts (BV1823)
- Internal model: market and credit risk - for financial instruments: a total must equal the sum of its parts (BV1825)
- Internal model: market and credit risk - for financial instruments: a total must equal the sum of its parts (BV1822)
- Internal model: market and credit risk - for financial instruments: values must agree (BV1826)
- Internal model: market and credit risk - for financial instruments: a total must equal the sum of its parts (BV1821)
- Internal model: market and credit risk - for financial instruments: values must agree (BV1827)
- Internal model: market and credit risk - for financial instruments: a total must equal the sum of its parts (BV1820)
- Internal model: market and credit risk - for financial instruments: a conditional check (BV1751_1)Blocking
Every Solvency II rule on S.26.09
Checks like this one, run at the point of submission, are the first step to real-time supervision. Line4 builds SupTech software for financial regulators that runs checks like these as each return arrives.