How to deal with NHG under Solvency II
Under the current Solvency II regime, is an insurance company permitted to take the national mortgage guarantee (Nationale Hypotheek Garantie – NHG) into account in determining the solvency capital requirement (SCR) for mortgage loans using the Standard Formula (SF)?
No, a mortgage loan including NHG does not lead to a lower SCR compared to a similar mortgage loan excluding NHG. The amendments made in 2019 to article 192(4) of the Solvency II Delegated Regulation did indeed broaden the possibilities to recognize guarantees in relation to mortgage loans, however the NHG does not comply with all the relevant Solvency II requirements on guarantees in relation to mortgage loans. Article 215(d) of the Solvency II Delegated Regulation for instance requires that an insurance company does not first have to pursue the obligor before obtaining a payment by the guarantor. However, the NHG requires an insurance company to first pursue the obligor before the guaranteed amount is paid out.