1. 1. Where Article 88 is complied with, insurance or reinsurance undertakings may calculate the capital requirement for spread risk referred to in Article 176 of this Regulation as follows:
\mathrm{SCR}_{\mathrm{bonds}} = \mathrm{MV}^{\mathrm{bonds}} \cdot \left( \sum_{\mathrm{i}} \%\mathrm{MV}_{\mathrm{i}}^{\mathrm{bonds}} \cdot \mathrm{stress}_{\mathrm{i}} + \%\mathrm{MV}_{\mathrm{norating}}^{\mathrm{bonds}} \cdot \min [\mathrm{dur}_{\mathrm{norating}} \cdot 0.03; 1] \right) + \Delta \mathrm{Liab}_{\mathrm{ul}}
where:
2. stressi referred to in point (f) of paragraph 1, for each credit quality step i, shall be equal to:
\mathrm{dur}_i \cdot b_i
(a)((a)) SCRbondsdenotesSCR_{bonds} denotes the capital requirement for spread risk on bonds and loans;
(b)((b)) MVbondsdenotesMV^{bonds} denotes the value in accordance with Article 75 of Directive 2009/138/EC of the assets subject to capital requirements for spread risk on bonds and loans;
(c)((c)) %MVibondsdenotes%MV_{i} ^{bonds} denotes the proportion of the portfolio of the assets subject to a capital requirement for spread risk on bonds and loans with credit quality stepi,step i, where a credit assessment by a nominated ECAI is available for those assets;
(d)((d)) %MVbondsnoratingdenotes%MV^{bonds} _{norating} denotes the proportion of the portfolio of the assets subject to a capital requirement for spread risk on bonds and loans for which no credit assessment by a nominated ECAI is available;
(e)((e)) durianddurnoratingdenotedur_{i} and dur_{norating} denote the modified duration denominated in years of the assets subject to a capital requirement for spread risk on bonds and loans where no credit assessment by a nominated ECAI is available;
(f)((f)) stressidenotesstress_{i} denotes a function of the credit quality stepiandstep i and of the modified duration denominated in years of the assets subject to a capital requirement for spread risk on bonds and loans with credit quality stepi,step i, set out in paragraph 2;
(g) $$\mathrm{MV}^{\mathrm{bonds}} \cdot \left(\sum_{\mathrm{i}}\left( \%\mathrm{MV}_{\mathrm{i}}^{\mathrm{bonds}}\sum_{i} \%\mathrm{MV}_{i}^{\mathrm{bonds}} \cdot \mathrm{stress}_{\mathrm{i}}\mathrm{stress}_{i} + \%\mathrm{MV}_{\mathrm{norating}}^{\mathrm{bonds}} \cdot \min [\mathrm{dur}_{\mathrm{norating}} \cdot 0.03; 1]\right)$$1] \right)$$
((g)) ΔLiabuldenotesΔLiab_{ul} denotes the increase in the technical provisions less risk margin for policies where the policyholders bear the investment risk with embedded options and guarantees that would result from an instantaneous decrease in the value of the assets subject to the capital requirement for spread risk on bonds of:.of:
2. stress i referred to in point (f) of paragraph 1, for each credit quality step i , shall be equal to: , where dur_{i}dur i is the modified duration denominated in years of the assets subject to a capital requirement for spread risk on bonds and loans with credit quality step i,i , and b_{i}b i is determined in accordance with the following table:
Credit quality step i | 0 | 1 | 2 | 3 | 4 | 5 | 6
bi | 0,9 % | 1,1 % | 1,4 % | 2,5 % | 4,5 % | 7,5 % | 7,5 %
3. 3.dur dur_{norating}norating referred to in point (e) of paragraph 1 and dur_{i}dur i referred to in paragraph 2 shall not be lower than 1 year.