Double default definition
Double default means that the risk of both the borrower and the guarantor or provider of credit protection defaulting for the same receivable is smaller than the risk of just one party defaulting. This situation has to be provided for separately as, for example, the circle of eligible providers of credit protection for the purposes of “double default” is not completely identical to the eligible providers of unfunded credit protection listed under section 163 (1) numbers 1 to 8 of the Solvency Regulation. Sovereigns were ruled out as providers of credit protection for ”double default” purposes for the following reasons: the impact of a sovereign default on an enterprise’s ability to meet its payment obligations is unclear and potentially serious. It does not, therefore, appear to be possible to develop appropriate calibration for such providers of credit protection.)