counterparty default risk in Solvency 2

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

  1. fadai

    fadai Made first post

    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?
  2. mugono

    mugono Ton up Member


    Cash at bank is a type 1 exposure for standard formula purposes.
  3. CapitalActuary

    CapitalActuary Very Active 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.

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