1. Where Article 88 is complied with, insurance or reinsurance undertakings may calculate the risk-mitigating effect on underwriting risk of a reinsurance arrangement or securitisation referred to in Article 196 as follows:
\mathrm{RM}_{\mathrm{re},\mathrm{all}} \cdot \frac{\mathrm{Recoverables}_i}{\mathrm{Recoverables}_{\mathrm{all}}}
where
RMre,alldenotes the risk mitigating effect on underwriting risk of the reinsurance arrangements and securitisations for all counterparties calculated in accordance with paragraph 2;
Recoverablesidenotes the best estimate of amounts recoverable from the reinsurance arrangement or securitisation and the corresponding debtors for counterpartyiandRecoverablesalldenotes the best estimate of amounts recoverable from the reinsurance arrangements and securitisations and the corresponding debtors for all counterparties.
2. The risk mitigating effect on underwriting risk of the reinsurance arrangements and securitisations for all counterparties referred to in paragraph 1 is the difference between the following capital requirements:
the hypothetical capital requirement for underwriting risk of the insurance or reinsurance undertaking if none of the reinsurance arrangements and securitisations exist;
the capital requirements for underwriting risk of the insurance or reinsurance undertaking.