Equity Type 2 Risk

Overview

Article 168 defines the Type 2 equity capital branch used in final equity-risk aggregation.^[1]

Article 168 groups the final equity-risk formula into a Type 1 component and a Type 2 component made of standard Type 2 equity, qualifying infrastructure equity risk, and qualifying infrastructure corporate equity risk. Article 169 defines the shocks for those branches: standard Type 2 equities use 49% plus the symmetric adjustment, qualifying infrastructure project equities use 30% plus 77% of the symmetric adjustment, and qualifying infrastructure corporate equities use 36% plus 92% of the symmetric adjustment.^[2]

Strategic, long-term, and duration-based Type 2 exposures are included in the relevant branch at the 22% preferential shock where the relevant regulatory conditions apply.

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 eligibility evidence. The input exposures should already be mutually exclusive and already classified into the Type 2 component.

Input Terms

• Standard Type 2 Equity Exposure: Type 2 exposure subject to 49% plus the symmetric adjustment.^[2]
• Strategic / Long-Term / Duration-Based Type 2 Exposures: Type 2 exposure using the 22% preferential shock where the relevant evidence or approval applies.^[4][5][6]
• Strategic Type 2 Shock Factors: Shock percentages applied to the strategic Type 2, infrastructure project, and infrastructure corporate buckets. They default to the prescribed 22%.^[2]
• Long-Term Type 2 Shock Factors: Shock percentages applied to the long-term Type 2, infrastructure project, and infrastructure corporate buckets. They default to the prescribed 22%.^[2]
• Duration-Based Type 2 Shock Factors: Shock percentages applied to the duration-based Type 2, infrastructure project, and infrastructure corporate buckets. They default to the prescribed 22%.^[6]
• Qualifying Infrastructure Project Equity Exposure: Infrastructure project equity subject to 30% plus 77% of the symmetric adjustment.^[1][2]
• Qualifying Infrastructure Corporate Equity Exposure: Infrastructure corporate equity subject to 36% plus 92% of the symmetric adjustment.^[1][2]
• 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 168 keeps Type 2 equity separate from Type 1 because the residual equity category carries a higher standard calibration and a different position in the final equity-risk correlation structure. Article 169 then preserves distinct standard, qualifying infrastructure project, and qualifying infrastructure corporate branches because each branch has its own regulatory shock calibration and symmetric-adjustment multiplier.^[1][2]

The preferential 22% lines remain separate from the standard and infrastructure lines so strategic, long-term, and duration-based eligibility evidence stays auditable before the prepared Type 2 capital amount enters Article 168 aggregation.

Important Notes

• No double counting: Standard, preferential, infrastructure project, and infrastructure corporate inputs must be mutually exclusive.
• Infrastructure is inside Type 2: Qualifying infrastructure project and corporate capital are not added after Article 168 aggregation; they are part of the Type 2 component correlated against Type 1.
• Eligibility not tested here: Strategic, long-term, duration-based, and infrastructure 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 2 input would duplicate current standard treatment. This page therefore documents the legacy concept but does not expose transitional equity inputs.
• No base-rate floor: The symmetric adjustment can reduce the standard Type 2 shock below 49% where the Article 172 adjustment is negative; the adjustment itself must be bounded by the applicable Article 172 corridor before it is entered or accepted.
• Reporting: The displayed result is intended to support the equity-risk component for the S.25.01.01 standard-formula reporting view.^[8]