1.13. Before allowing for an insurance risk-mitigation technique in the calculation of the Solvency Capital Requirement with the standard formula, undertakings should identify whether reinsurance or special purpose vehicle arrangements behave differently than the insurance policies of the undertaking under a comprehensive set of risk scenarios due to differences in terms and conditions.

1.14. Undertakings should consider basis risk arising from a currency mismatch to be material where the exposure covered by the insurance risk-mitigation technique is denominated in a different currency than the risk exposure of the undertaking, unless the currencies involved are pegged within a sufficiently narrow corridor or the fixed exchange rate is provided in the reinsurance contract.

1.15. If there is material basis risk stemming from a currency mismatch as referred to in paragraph 1.14, undertakings should not allow for the risk-mitigation technique in the calculation of the Solvency Capital Requirement unless the provisions of Article 86 of Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC [OJ L 12, 17.01.2015, p. 1-797] apply.