Where Article 88 is complied with, insurance or reinsurance undertakings may calculate the risk-mitigating effect on underwriting risk j of a proportional reinsurance arrangement for counterparty i referred to Article 196 as follows:
\frac{\mathrm{Recoverables}_i}{\mathrm{BE} - \mathrm{Recoverables}_{\mathrm{all}}} \cdot \mathrm{SCR}_j
where
BE denotes the best estimate of obligations gross of the amounts recoverable,
Recoverablesi denotes the best estimate of amounts recoverable from the proportional reinsurance arrangement and the corresponding debtors for counterparty i,
Recoverablesall denotes the best estimate of amounts recoverable from the proportional reinsurance arrangements and the corresponding debtors for all counterparties
SCRj denotes the capital requirements for underwriting risk j of the insurance or reinsurance undertaking.