How is the Type A contingent asset taken account of in the levy calculation?
A Type A contingent asset affects the risk based levy calculation by substituting the insolvency risk of the guarantor for that of the sponsoring employer(s) for the part of the deficit guaranteed. This is achieved by applying the discount factor ‘z’ to the deemed value of the Type A contingent asset in the formula for determining total scheme assets: A = S + C + (N x z). The discount factor z is equal to 1- (probability of insolvency of guarantor/probability of insolvency of sponsoring employer(s)).
