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counterparty default risk in Solvency 2

Discussion in 'Off-topic' started by fadai, Dec 8, 2020.

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  1. fadai

    fadai Member

    Say, I'm an insurer and I've placed a deposit in Bank X. Which category does the default risk of the Bank X fall in in the context of Solvency 2? There're are 2 types of CDR in Solvency 2: type 1 and type 2. I looked at both of them, and don't realize in which type this kind of risk falls?
     
    fadai, Dec 8, 2020
    #1
  2. mugono

    mugono Ton up Member

    Hi,

    Cash at bank is a type 1 exposure for standard formula purposes.
     
    mugono, Dec 9, 2020
    #2
  3. CapitalActuary

    CapitalActuary Ton up Member

    If it’s available to withdraw immediately without penalty it’s probably “cash at bank” so type 1, as mugono says.

    If it’s something like a term deposit though, it’ll actually come under market risk as a loan, so will get concentration risk, spread risk, and so on.
     
    CapitalActuary, Dec 10, 2020
    #3

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