The risk-mitigating effect on underwriting or market risks of a reinsurance arrangement, securitisation or derivative shall be the difference between the following capital requirements:
(a)
the hypothetical capital requirement for underwriting or market risk of the insurance or reinsurance undertaking that would apply if the reinsurance arrangement, securitisation or derivative did not exist;
(b)
the capital requirement for underwriting or market risk of the insurance or reinsurance undertaking.