European Parliament legislative resolution of 22
April 2009 on the amended proposal for a directive of the
European Parliament and of the Council on the taking-up and pursuit of
the business of Insurance and Reinsurance (recast)
(19) All insurance and reinsurance undertakings should have, as an
integrated part of their business strategy, a regular practice of
assessing their over-all solvency needs with a view to their specific
risk profile (own risk and solvency assessment).
This assessment does not require the development of an internal
model nor does it serve to calculate a capital
requirement different from the Solvency Capital Requirement and the
Minimum Capital Requirement.
The results of each assessment should be reported to the supervisory
authority as part of the information to be provided for supervisory
purposes.
(35) The supervisory regime should provide for a risk-sensitive
requirement, which is based on a prospective
calculation to ensure accurate and timely intervention by supervisory
authorities (the Solvency Capital Requirement), and a minimum level of
security below which the amount of financial resources should not fall
(the Minimum Capital Requirement).
Both capital requirements should be harmonised throughout the
Community in order to achieve a uniform level of protection for
policyholders.
For the good functioning of the Solvency II regime, there should be
an adequate ladder of intervention between the
Minimum Capital Requirement and the Solvency Capital Requirement.
(42) When the amount of eligible basic own funds
falls below the Minimum Capital Requirement, the authorisation of
insurance and reinsurance undertakings should be withdrawn, if those
undertakings are unable to re-establish the amount of eligible basic
own funds at the level of the Minimum Capital Requirement within a
short period of time.
(43) The Minimum Capital Requirement should
ensure a minimum level below which the amount of financial resources
should not fall.
It is necessary that it is calculated in accordance with a simple
formula, which is subject to a defined floor and cap based on the
risk-based Solvency Capital Requirement in order to allow for an
escalating ladder of supervisory intervention, and that it is based on
the data which can be audited.
(53) An insurance undertaking offering assistance contracts should
possess the means necessary to provide the benefits in kind which it
offers within an appropriate period of time.
Special provisions should be laid down for
calculating the Solvency Capital Requirement and the absolute floor of
the Minimum Capital Requirements which such undertaking should
possess.
Article 18
Conditions for authorisation
1. The home Member State shall require every undertaking for which
authorisation is sought to:
(a) as far as insurance undertakings are concerned, limit their
objects to the business of insurance and operations arising directly
there from, to the exclusion of all other commercial business;
(b) as far as reinsurance undertakings are concerned, limit their
objects to the business of reinsurance and related operations; this
requirement may include a holding company function and activities with
respect to financial sector activities within the meaning of Article
2(8) of Directive 2002/87/EC;
(c) submit a scheme of operations in accordance with Article 23;
(d) hold the eligible basic own funds to cover
the absolute floor of the Minimum Capital Requirement provided
for in point (d) of Article 127(1);
(e) show evidence that it will be in a position to hold eligible own
funds to cover the Solvency Capital Requirement, as provided for in
Article 100, going forward;
(f) show evidence that it will be in a position
to hold eligible basic own funds to cover the Minimum Capital
Requirement, as provided for in Article 125, going forward;
(g) show evidence that it will be in a position to comply with the
system of governance referred to in Chapter IV, Section 2;
(h) as far as non-life insurance is concerned communicate the name and
address of all claims representatives appointed pursuant to Article 4
of Directive 2000/26/EC in each Member State other than the Member
State in which the authorisation is sought if the risks to be covered
are classified in class 10 of point A of Annex I, other than carrier's
liability.
2. An insurance undertaking seeking authorisation to extend its
business to other classes or to extend an authorisation covering only
some of the risks pertaining to one class shall be required to submit
a scheme of operations in accordance with Article 23.
It shall, in addition, be required to show proof that it possesses the
eligible own funds to cover the Solvency Capital Requirement and
Minimum Capital Requirement provided for in Articles 100(1) and 126.
3. Without prejudice to paragraph 2, an insurance undertaking carrying
on life activities, and seeking authorisation to extend its business
to the risks listed in classes 1 or 2 in point A of Annex I as
referred to in Article 72, shall demonstrate the following:
(a) that it possesses the eligible basic own funds to cover the
absolute floor of the Minimum Capital
Requirement for life insurance undertakings and the absolute
floor of the Minimum Capital Requirement for
non-life insurance undertakings, as referred to in point (d) of
Article 127(1);
(b) that it undertakes to cover the minimum financial obligations
referred to in Article 73, going forward.
4. Without prejudice to paragraph 2, an insurance undertaking carrying
on non-life activities for the risks listed in classes 1 or 2 in point
A of Annex I, and seeking authorisation to extend its business to life
insurance risks as referred to in Article 72, shall demonstrate that
the following:
(a) that it possesses the eligible basic own
funds to cover the absolute floor of the Minimum Capital Requirement
for life insurance undertakings and the absolute floor of the Minimum
Capital Requirement for non-life insurance undertakings, as referred
to in point (d) of Article 127(1);
(b) that it undertakes to cover the minimum financial obligations
referred to in Article 73(3) going forward.
SECTION 3 – PUBLIC DISCLOSURE
Article 50
Report on solvency and financial condition: contents
1. Member States shall, taking into account the principles set out in
paragraphs 3 and 4 of Article 35, require insurance and reinsurance
undertakings to publicly disclose, on an annual basis, a report on
their solvency and financial condition.
That report shall contain the following information, either in full or
by way of references to equivalent information, both in nature and
scope, disclosed publicly under other legal or regulatory
requirements:
(a) a description of the business and the performance of the
undertaking;
(b) a description of the system of governance and an assessment of its
adequacy for the risk profile of the undertaking;
(c) a description, separately for each category of risk, of the risk
exposure, concentration, mitigation and sensitivity;
(d) a description, separately for assets, technical provisions, and
other liabilities, of the bases and methods used for their valuation,
together with an explanation of any major differences in the bases and
methods used for their valuation in financial statements;
(e) a description of the capital management, including at least the
following:
(i) the structure and amount of own funds, and their quality;
(ii) the amounts of the Minimum Capital
Requirement and of the Solvency Capital Requirement;
(iia) the option set out in Article 305b used for the calculation of
the Solvency Capital Requirement;
(iii) information allowing a proper understanding of the main
differences between the underlying assumptions of the standard formula
and those of any internal model used by the undertaking for the
calculation of its Solvency Capital Requirement;
(iv) the amount of any non-compliance with the
Minimum Capital Requirement or any significant non-compliance
with the Solvency Capital Requirement during the reporting period,
even if subsequently resolved, with an explanation of its origin and
consequences as well as any remedial measures taken.
2. The description referred to in point (e)(i) of paragraph 1 shall
include an analysis of any significant changes as compared to the
previous reporting period and an explanation of any major differences
in relation to the value of such elements in financial statements, and
a brief description of the capital transferability.
The disclosure of the Solvency Capital Requirement referred to in
point (e)(ii) of paragraph 1 shall show separately the amount
calculated in accordance with Chapter VI, Section 4, Subsections 2 and
3 and any capital add-on imposed in accordance with Article 37 or the
impact of the specific parameters the insurance or reinsurance
undertaking is required to use in accordance with Article 108a,
together with concise information on its justification by the
supervisory authority concerned.
However, and without prejudice to any disclosure mandatory under any
other legal or regulatory requirements, Member States may provide
that, although the total Solvency Capital Requirement referred to in
point (e)(ii) of paragraph 1 is disclosed, the capital add-on or the
impact of the specific parameters the insurance or reinsurance
undertaking is required to use in accordance with Article 108a need
not be separately disclosed during a transitional period not exceeding
five years after the date referred to in Article 310.
The disclosure of the Solvency Capital Requirement shall be
accompanied, where applicable, by an indication that its final amount
is still subject to supervisory assessment.
Article 53
Report on solvency and financial condition: updates and additional
voluntary information
1. In the event of any major development affecting significantly the
relevance of the information disclosed in accordance with Articles 50
and 52, insurance and reinsurance undertakings shall disclose
appropriate information on its nature and effects.
For the purposes of the first subparagraph, at least the following
shall be regarded as major developments:
(a) where non-compliance with the Minimum
Capital Requirement is observed and the supervisory authorities
either consider that the undertaking will not be able to submit a
realistic short-term finance scheme or do not obtain such a scheme
within one month;
(b) where a significant non-compliance with the Solvency Capital
Requirement is observed and the supervisory authorities do not obtain
a realistic recovery plan within two months.
In the cases referred to in point (a) of the second subparagraph, the
supervisory authorities shall require the undertaking concerned to
disclose immediately the amount of the non-compliance, together with
an explanation of its origin and consequences, including any remedial
measure taken.
Where, in spite of a short-term finance scheme initially considered to
be realistic, a non-compliance with the Minimum
Capital Requirement has not been resolved three months after its
observation, it shall be disclosed at the end of that period, together
with an explanation of its origin and consequences, including any
remedial measures taken as well as any further remedial measures
planned.
In the case referred to in point (b) of the second subparagraph, the
supervisory authorities shall require the undertaking concerned to
disclose immediately the amount of the non-compliance, together with
an explanation of its origin and consequences, including any remedial
measure taken.
Where, in spite of the recovery plan initially considered to be
realistic, a significant non-compliance with the Solvency Capital
Requirement has not been resolved six months after its observation, it
shall be disclosed at the end of that period, together with an
explanation of its origin and consequences, including any remedial
measures taken as well as any further remedial measures planned.
2. Insurance and reinsurance undertakings may disclose, on a voluntary
basis, any information or explanation related to their solvency and
financial condition which is not already required to be disclosed in
accordance with Articles 50 and 52 and paragraph 1 of this Article.
Article 66
Use of confidential information
Supervisory authorities which receive confidential information under
Articles 63 or 64 may use it only in the course of their duties and
for the following purposes:
(1) to check that the conditions governing the
taking up of the business of insurance or reinsurance are met and to
facilitate the monitoring of the conduct of such business, especially
with regard to the monitoring of the technical provisions, the Minimum
Capital Requirement, the Solvency Capital Requirement and the
governance system;
(2) to impose sanctions;
(3) in administrative appeals against decisions of the supervisory
authorities;
(4) in court proceedings under this Directive.
SECTION 6- DUTIES OF AUDITORS
Article 71
Duties of auditors
1. Member States shall provide at least that persons authorised within
the meaning of Eighth Council Directive 84/253/EEC of 10 April 1984
based on Article 54 (3) (g) of the Treaty on the approval of persons
responsible for carrying out the statutory audits of accounting
documents , who perform in an insurance or reinsurance undertaking the
statutory audit referred to in Article 51 of Fourth Council Directive
78/660/EEC of 25 July 1978 based on Article 54 (3) (g) of the Treaty
on the annual accounts of certain types of companies , Article 37 of║
Directive 83/349/EEC or Article 31 of Directive 85/611/EEC or any
other statutory task, shall have a duty to report promptly to the
supervisory authorities any fact or decision concerning that
undertaking of which they have become aware while carrying out that
task and which is liable to bring about any of the following:
(a) a material breach of the laws, regulations or administrative
provisions which lay down the conditions governing authorisation or
which specifically govern pursuit of the activities of insurance and
reinsurance undertakings;
(b) the impairment of the continuous functioning of the insurance or
reinsurance undertaking;
(c) the refusal to certify the accounts or to the expression of
reservations;
(d) the non-compliance with the Solvency Capital Requirement;
(e) the non-compliance with the Minimum Capital
Requirement.
The persons referred to in the first subparagraph shall likewise have
a duty to report any facts and decisions of which they have become
aware in the course of carrying out a task as described in the first
subparagraph in an undertaking which has close links resulting from a
control relationship with the insurance or reinsurance undertaking
within which they are carrying out that task.
2. The disclosure in good faith to the supervisory authorities, by
persons authorised within the meaning of Directive 84/253/EEC, of any
fact or decision referred to in paragraph 1 shall not constitute a
breach of any restriction on disclosure of information imposed by
contract or by any legislative, regulatory or administrative provision
and shall not involve such persons in liability of any kind.
Article 98
Eligibility and limits applicable to Tier 1, Tier 2 and Tier 3
1. As far as the compliance with the Solvency Capital Requirement is
concerned, the eligible amounts of Tier 2 and Tier 3 items shall be
subject to quantitative limits. Those limits shall be such as to
ensure that at least the following conditions are met:
(a) the proportion of Tier 1 items in the eligible own funds is higher
than one third of the total amount of eligible own funds;
(b) the eligible amount of Tier 3 items is less than one third of the
total amount of eligible own funds.
2. As far as the compliance with the Minimum
Capital Requirement is concerned, the amount of basic own fund items
eligible to cover the Minimum Capital Requirement which are classified
in Tier 2 shall be subject to quantitative limits. Those limits shall
be such as to ensure, as a minimum, that the proportion of Tier 1
items in the eligible basic own funds is higher than one half of the
total amount of eligible basic own funds.
4. The eligible amount of own funds to cover the Solvency Capital
Requirement set out in Article 100 shall be equal to the sum of the
amount of Tier 1, the eligible amount of Tier 2 and the eligible
amount of Tier 3.
5. The eligible amount of basic own funds to
cover the Minimum Capital Requirement set out in Article 126 shall be
equal to sum of the amount of Tier 1 and the eligible amount of basic
own fund items classified in Tier 2.
SECTION 5 - MINIMUM CAPITAL REQUIREMENT
Article 126
General provisions
Member States shall require that insurance and reinsurance
undertakings hold eligible basic own funds, to cover the Minimum
Capital Requirement.
Article 127
Calculation of the Minimum Capital Requirement
1. The Minimum Capital Requirement shall be
calculated in accordance with the following principles:
(a) it shall be calculated in a clear and simple manner, and in such a
way as to ensure that the calculation can be audited;
(b) it shall correspond to an amount of eligible basic own funds below
which policyholders and beneficiaries are exposed to an unacceptable
level of risk if insurance and reinsurance undertakings were allowed
to continue their operations;
(c) the linear function referred to in paragraph 2 used to calculate
the Minimum Capital Requirement shall be calibrated to the
Value-at-Risk of the basic own funds of an insurance or reinsurance
undertaking
subject to a confidence level of 85 % over a one-year period;
(d) it shall have an absolute floor of
(i) 2 200 000 EUR for non-life insurance
undertakings, including captive insurance undertakings, except in the
case where all or some of the risks included in one of the classes 10
to 15 listed in point A of Annex 1 are covered, in which case it shall
not be less than 3 200 000 EUR,
(ii) 3 200 000 EUR for life insurance undertakings, including captive
insurance undertakings,
(iii) 3 200 000 EUR for reinsurance undertakings, except in the case
of captive reinsurance undertakings, in which case the Minimum Capital
Requirement shall not be less than a minimum of 1 000 000 EUR,
(iv) the sum of the amounts set out in points (i) and (ii) for
insurance undertakings as referred to in Article 72(5).
1a. Subject to paragraph 1b the Minimum Capital
Requirement shall be calculated as a linear function of a set or
sub-set of the following variables: the undertaking’s technical
provisions, written premiums, capital-at-risk, deferred tax and
administrative expenses. The variables used shall be measured net of
reinsurance.
1b. Without prejudice to point (d) of paragraph 1,
the Minimum Capital Requirement shall not fall below 25% nor exceed
45%, of the undertaking’s Solvency Capital Requirement,
calculated in accordance with Chapter VI, Section 4, Sub-sections 2 or
3, and including any capital add-on imposed in accordance with Article
37.
Member States shall allow their supervisory authorities, for a period
not exceeding two years after the date referred to in Article 310(1),
to require an insurance or reinsurance undertaking to apply the
percentages referred to in the previous subparagraph exclusively to
the undertaking's Solvency Capital Requirement calculated in
accordance with Chapter VI, Section 4, Sub-section 2.
2. Insurance and reinsurance undertakings shall calculate the Minimum
Capital Requirement at least quarterly and report the results of that
calculation to supervisory authorities.
If either of the limits referred to in paragraph 1b determines an
undertaking’s Minimum Capital Requirement, the undertaking shall
provide to the supervisory authority information allowing a proper
understanding of the reasons for this.
2a. The Commission shall submit to the European Parliament and the
European Insurance and Occupational Pensions Committee, at the latest
five years after the date referred to in Article 310(1), a report on
Member States' rules and supervisory authorities' practices adopted
pursuant to paragraphs 1, 1a, 1b or 2.
That report shall address, in particular, the use and level of the cap
and the floor set out in paragraph 1b as well as any problems faced by
supervisory authorities and by undertakings in the application of this
Article.
Article 128
Implementing measures
The Commission shall adopt implementing measures specifying the
calculation of the Minimum Capital Requirement, referred to in
Articles 126 and 127.
Those measures designed to amend non-essential elements of this
Directive, by supplementing it shall be adopted in accordance with the
regulatory procedure with scrutiny referred to in Article 304 (3).
Article 129
Transitional arrangements regarding compliance with the Minimum
Capital Requirement
By way of derogation from Articles 137 and 142, where insurance and
reinsurance undertakings comply with the Required Solvency Margin
referred to in Article 28 of Directive 2002/83/EC,
Article 16 a of Directive 73/239/EC or Articles 37, 38 or 39 of
Directive 2005/68/EC respectively on the date set out in Article
310(1) but do not hold sufficient eligible basic own funds to cover
the Minimum Capital Requirement, the undertakings concerned shall
comply with Article 126 within one year from the date as set out in
Article 310(1).
If the undertaking concerned fails to comply with Article 126 within
the period set out in the first paragraph, the authorisation of the
undertaking shall be withdrawn, subject to the applicable processes
provided for in the national legislation.
Article 137
Non-Compliance with the Minimum Capital Requirement
1. Insurance and reinsurance undertakings shall
immediately inform the supervisory authority as soon as they observe
that the Minimum Capital Requirement is no longer complied with, or
where there is a risk of non-compliance in the coming three months.
2. Within one month from the observation
of the non-compliance with the Minimum Capital Requirement the
insurance or reinsurance undertaking concerned shall submit, for
approval by the supervisory authority, a short-term realistic finance
scheme to restore, within three months from that observation, the
eligible basic own funds, at least to the level of the Minimum Capital
Requirement or to reduce its risk profile to
ensure compliance with the Minimum Capital Requirement.
3. The supervisory authority of the home Member State may also
restrict or prohibit the free disposal of the assets of the insurance
or reinsurance undertaking. It shall inform the supervisory
authorities of the host Member States accordingly. Those authorities
shall, at the request of the supervisory authority of the home Member
State, take the same measures. The supervisory authority of the home
Member State shall designate the assets to be covered by such
measures.
Article 164
Solvency Capital Requirement and Minimum Capital Requirement
1. Each Member State shall require for branches which are set up in
its territory an amount of eligible own funds consisting of the items
referred to in Article 98(4).
The Solvency Capital Requirement and the Minimum Capital Requirement
shall be calculated in accordance with the provisions of Chapter VI,
Sections 4 and 5.
However, for the purpose of calculating the Solvency Capital
Requirement and the Minimum Capital Requirement, account shall be
taken of the following:
(a) for non-life insurance, only of the operations carried on by the
branch concerned;
(b) for life insurance, only of the operations effected by the branch
concerned.
2. The eligible amount of basic own funds
required to cover the Minimum Capital Requirement and the absolute
floor of that Minimum Capital Requirement shall be constituted in
accordance with Article 98(5).
3. The eligible amount of basic own funds may not be less than
one-half of the absolute floor required under point (d) of Article
127(1).
The deposit lodged in accordance with point (e) of Article 160(2)
shall be counted towards such eligible basic own funds to cover the
Minimum Capital Requirement.
4. The assets representing the Solvency Capital
Requirement must be kept within the Member State where the activities
are carried on up to the amount of the Minimum Capital Requirement and
the excess within the Community.
SUBSECTION 4 – CALCULATION METHODS
Article 228
Method 1 (Default method): Accounting consolidation-based method
1. The calculation of the group solvency of the participating
insurance or reinsurance undertaking shall be carried out on the basis
of the consolidated accounts.
The group solvency of the participating insurance or reinsurance
undertaking is the difference between the following:
(a) the own funds eligible to cover the Solvency Capital Requirement,
calculated on the basis of consolidated data;
(b) the Solvency Capital Requirement at group level calculated on the
basis of consolidated data.
The rules laid down in Title I, Chapter VI, Section 3, Subsections 1,
2 and 3 and in Title I, Chapter VI, Section 4, Subsections 1, 2 and 3
shall apply for the calculation of the own funds eligible for the
Solvency Capital Requirement and of the Solvency Capital Requirement
at group level based on consolidated data.
2. The Solvency Capital Requirement at group level based on
consolidated data (consolidated group Solvency Capital Requirement)
shall be calculated on the basis of either the standard formula or an
approved internal model, in a manner consistent with the general
principles contained in Title I, Chapter VI, Section 4, Subsections 1
and 2 and Title I, Chapter VI, Section 4, Subsections 1 and 3.
The consolidated group Solvency Capital Requirement shall have as a
minimum the sum of the following:
(a) the minimum capital requirement (Minimum Capital Requirement) as
referred to in Article 127 of the participating insurance or
reinsurance undertaking;
(b) the proportional share of the Minimum
Capital Requirement of the related insurance and reinsurance
undertakings.
That minimum shall be covered by eligible basic own funds as
determined in Article 98(5).
For the purposes of determining whether such eligible own funds
qualify to cover the minimum consolidated group Solvency Capital
Requirement, the principles set out in Articles 219 to 227 shall apply
mutatis mutandis. The provisions set out in paragraphs 1 and 2 of
Article 137 shall apply by analogy.
Article 238
Subsidiaries of an insurance or reinsurance undertaking:
non-compliance with the Solvency Capital Requirement
1. Without prejudice to Article 136, the supervisory authority having
authorised the subsidiary shall – in case of non-compliance with
Solvency Capital Requirement – forward without delay to the college of
supervisors the recovery plan submitted by the subsidiary in order to
achieve, within six months from the observation of the non-compliance
with the Solvency Capital Requirement, the reestablishment of the
level of eligible own funds or the reduction of its risk profile to
ensure compliance with the Solvency Capital Requirement.
The college of supervisors shall do everything within its power to
reach an agreement on the proposal of the supervisory authority
regarding the approval of the recovery plan within four months from
the date of the observation of the non-compliance with the Solvency
Capital Requirement.
In the absence of an agreement, the supervisory authority having
authorised the subsidiary makes its own decision on the approval of
the recovery plan, taking duly into account the views and reservations
of the other supervisory authorities within the college.
1a. When the supervisory authority having authorised the subsidiary
identifies, in accordance with article 134, deteriorating financial
conditions it shall notify without delay the college of supervisors.
With the exception of in emergency situations, the measures to be
taken should be discussed under the college of supervisors.
The college of supervisors shall do everything within its power to
reach an agreement on the proposal of the supervisory authority
regarding the measures to be taken within one month from the date of
the communication.
In the absence of an agreement, the supervisory authority having
authorised the subsidiary makes its own decision, taking duly into
account the views and reservations of the other supervisory
authorities within the college.
1b. Without prejudice of Article 137, the
supervisory authority having authorised the subsidiary shall – in case
of non-compliance with Minimum Capital Requirement – forward without
delay to the college of supervisors the short-term finance scheme
submitted by the subsidiary in order to achieve, within three months
from the observation of the non-compliance with the Minimum Capital
Requirement, the reestablishment of the level of eligible own funds
covering the Minimum Capital Requirement or the reduction of its risk
profile to ensure compliance with the Minimum Capital Requirement.
The college of supervisors should also be
informed of any measures taken to enforce the Minimum Capital
Requirement at the level of the subsidiary.
