Equity Type 1 Risk

Overview

Article 169 defines the Type 1 equity capital branch used in final equity-risk aggregation.^[1]

Article 168 defines Type 1 equities as listed EEA/OECD regulated-market equities and certain eligible fund or portfolio exposures.^[2] Article 169 then separates the Type 1 capital requirement into standard Type 1 equities, strategic Type 1 equities, and long-term Type 1 equities. Duration-based treatment is also included here when it applies to Type 1 exposures, so the output is the prepared Type 1 equity capital amount for final Article 168 aggregation.

Under Article 87, Basic Own Funds are defined as the excess of assets over liabilities both valued on a market-consistent basis, where qualifying subordinated liabilities are excluded from the liability figure.^[3] A full undertaking-specific BOF impact may therefore require recalculating technical provisions under Article 83.

Article 83 mandates that the following assumptions apply in any standard formula scenario-based module or sub-module calculation: * The risk margin does not change. * Deferred tax assets and liabilities do not change. * Future discretionary benefits do not change. * Management actions during the scenario are not reflected.

This page does not model liability-side responses, Article 84 look-through, or classification evidence. The input exposures should already be mutually exclusive and already classified as Type 1.

Input Terms

• Standard Type 1 Equity Exposure: Type 1 exposure subject to the standard Article 169 shock of 39% plus the symmetric adjustment.^[1]
• Strategic Type 1 Equity Exposure: Type 1 exposure evidenced as strategic under Article 171 and shocked at 22%.^[4][1]
• Long-Term Type 1 Equity Exposure: Type 1 exposure treated as long-term equity under Article 171a and shocked at 22%.^[5][1]
• Duration-Based Type 1 Equity Exposure: Type 1 exposure using duration-based treatment where supervisory approval applies.^[6][1]
• Strategic Type 1 Equity Shock Factor: Shock percentage applied to the strategic Type 1 bucket. It defaults to the prescribed 22%.^[1]
• Long-Term Type 1 Equity Shock Factor: Shock percentage applied to the long-term Type 1 bucket. It defaults to the prescribed 22%.^[1]
• Duration-Based Type 1 Equity Shock Factor: Shock percentage applied to the duration-based Type 1 bucket. It defaults to the prescribed 22%.^[6]
• Symmetric Adjustment: The Article 172 symmetric adjustment, expressed in percentage points and supported by official EIOPA technical information for the reporting date.^[7]

Technical Rationale

Article 169 separates standard Type 1 equity from strategic, long-term, and duration-based treatments because the preferential treatments are legal eligibility outcomes, not discretionary shock assumptions.^[1][4][5][6] Keeping the buckets separate makes eligibility evidence and shock calibration auditable before the prepared Type 1 equity capital amount enters final Article 168 aggregation.

The output is the prepared Type 1 equity input for Equity Risk.

Important Notes

• No double counting: The standard, strategic, long-term, and duration-based inputs must be mutually exclusive.
• Eligibility not tested here: Strategic, long-term, and duration-based labels assume the undertaking has already retained the necessary evidence or approval.
• Legacy transitional treatment: Article 173 transitional equity relief has phased to a 100% standard-parameter weight from 2023, so a separate transitional Type 1 input would duplicate current standard treatment. This page therefore documents the legacy concept but does not expose transitional equity inputs.
• Branch boundary: This page does not model any liability-side response and is not a complete equity SCR calculation by itself.
• Reporting: The displayed result is intended to support the equity-risk component for the S.25.01.01 standard-formula reporting view.^[8]