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The Solvency 2 Regulations 2015

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Changes to legislation:

The Solvency 2 Regulations 2015 is up to date with all changes known to be in force on or before 26 April 2024. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations. Help about Changes to Legislation

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  • Regulations revoked by 2023 c. 29 Sch. 1 Pt. 2
  • reg. 10 words omitted by S.I. 2019/407 reg. 9(3)(c) (This amendment not applied to legislation.gov.uk. Reg. 9(3)(c) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(c)(ii))
  • reg. 10 words substituted by S.I. 2019/407 reg. 9(3)(b)(i) (This amendment not applied to legislation.gov.uk. Reg. 9(3)(b)(i) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(c)(i))
  • reg. 12 omitted by S.I. 2019/407 reg. 9(5) (This amendment not applied to legislation.gov.uk. Reg. 9(5) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(d))
  • reg. 13 omitted by S.I. 2019/407 reg. 9(5) (This amendment not applied to legislation.gov.uk. Reg. 9(5) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(d))
  • reg. 14 omitted by S.I. 2019/407 reg. 9(5) (This amendment not applied to legislation.gov.uk. Reg. 9(5) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(d))
  • reg. 15(1) excluded (temp.) by S.I. 2019/407, reg. 13 (as inserted) by S.I. 2019/710 reg. 41 (This amendment not applied to legislation.gov.uk. Reg. 41 omitted immediately before IP completion day by virtue of S.I. 2020/1385, regs. 1(4), 64(5))
  • reg. 16(1) words omitted by S.I. 2019/407 reg. 9(7)(a) (This amendment not applied to legislation.gov.uk. Reg. 9(7) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(g))
  • reg. 16(2) omitted by S.I. 2019/407 reg. 9(7)(b) (This amendment not applied to legislation.gov.uk. Reg. 9(7) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(g))
  • reg. 18 omitted by S.I. 2019/407 reg. 9(9) (This amendment not applied to legislation.gov.uk. Reg. 9(9) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(i))
  • reg. 19(1)(b) words substituted by S.I. 2019/407 reg. 9(10)(a) (This amendment not applied to legislation.gov.uk. Reg. 9(10)(a) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(j)(i))
  • reg. 20(1)(b) word substituted by S.I. 2019/407 reg. 9(11)(a)(ii)(aa) (This amendment not applied to legislation.gov.uk. Reg. 9(11)(a)(ii)(aa) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(l)(i))
  • reg. 20(5) omitted by S.I. 2019/407 reg. 9(11)(d) (This amendment not applied to legislation.gov.uk. Reg. 9(11)(d) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(l)(ii))
  • reg. 24(1)(2) excluded (temp.) by S.I. 2019/407, reg. 13 (as inserted) by S.I. 2019/710 reg. 41 (This amendment not applied to legislation.gov.uk. Reg. 41 omitted immediately before IP completion day by virtue of S.I. 2020/1385, regs. 1(4), 64(5))
  • reg. 24(2) words omitted by S.I. 2019/407 reg. 9(13)(b) (This amendment not applied to legislation.gov.uk. Reg. 9(13)(b) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(m)(ii))
  • reg. 24(3) omitted by S.I. 2019/407 reg. 9(13)(c) (This amendment not applied to legislation.gov.uk. Reg. 9(13)(c) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(4)(m)(iii))
  • reg. 25 excluded (temp.) by S.I. 2019/407, reg. 13 (as inserted) by S.I. 2019/710 reg. 41 (This amendment not applied to legislation.gov.uk. Reg. 41 omitted immediately before IP completion day by virtue of S.I. 2020/1385, regs. 1(4), 64(5))
  • reg. 28(2) excluded (temp.) by S.I. 2019/407, reg. 13 (as inserted) by S.I. 2019/710 reg. 41 (This amendment not applied to legislation.gov.uk. Reg. 41 omitted immediately before IP completion day by virtue of S.I. 2020/1385, regs. 1(4), 64(5))
  • reg. 36(4) excluded (temp.) by S.I. 2019/407, reg. 13 (as inserted) by S.I. 2019/710 reg. 41 (This amendment not applied to legislation.gov.uk. Reg. 41 omitted immediately before IP completion day by virtue of S.I. 2020/1385, regs. 1(4), 64(5))
  • reg. 38(1) words omitted by S.I. 2019/407 reg. 10(2)(b) (This amendment not applied to legislation.gov.uk. Reg. 10(2)(b) substituted immediately before IP completion day by S.I. 2019/680, reg. 10(5))

PART 1U.K.Citation, commencement and interpretation

Citation and commencementU.K.

1.—(1) These Regulations may be cited as the Solvency 2 Regulations 2015.

(2) Except where paragraph (3) applies, these Regulations come into force on 1st January 2016.

(3) Regulations 1, 2, 38 to 58 and paragraph 15 of Schedule 1 come into force on 31st March 2015.

(4) Before 1st January 2016, references to “the Solvency 2 Directive” in any amendment of FSMA that comes into force in accordance with paragraph (3) are to be read as if the amendments made by paragraphs 16(b) and 17(3) of Schedule 1 were already in force.

InterpretationU.K.

2.—[F1(1) In these Regulations—

“capital add-on” means the amount by which the solvency capital requirement of an insurance undertaking or reinsurance undertaking, or a group, is increased by the PRA;

“college of supervisors” means a permanent but flexible structure for the co-operation, co-ordination and facilitation of decision making concerning the supervision of a group;

“common management relationship” means a relationship between two or more undertakings which satisfies the following conditions—

(a)

the undertakings are not connected in the manner described in section 1162 of, and Schedule 7 to, the Companies Act 2006, and

(b)

either—

(i)

the undertakings are managed on a unified basis pursuant to a contract with one of them, or provisions in the undertakings' respective memoranda or articles of association, or

(ii)

the administrative, management or supervisory bodies of those undertakings consist, for the major part, of the same persons in office during the financial year in respect of which it is being decided whether such a relationship exists;

“financial conglomerate” has the meaning given in regulation 1(2) of the Financial Conglomerates and Other Financial Groups Regulations 2004, as amended by the Financial Conglomerates and Other Financial Groups (Amendments etc.) (EU Exit) Regulations 2019;

“Financial Conglomerates Directive” means Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings, and investment firms in a financial conglomerate, as it had effect immediately before IP completion day;

“FSC” means the Financial Services Commission of Gibraltar;

“FSMA” means the Financial Services and Markets Act 2000;

“Gibraltarian insurance undertaking” means an undertaking which—

(a)

has its head office in Gibraltar;

(b)

is authorised by the FSC to carry on one or more classes of insurance business within the meaning of section 2(1) of the Financial Services (Insurance Companies) Act of Gibraltar; and

(c)

would require authorisation in accordance with Article 14 of the Solvency 2 Directive if the United Kingdom were a member State;

“Gibraltarian reinsurance undertaking” means an undertaking which—

(a)

has its head office in Gibraltar;

(b)

is authorised by the FSC to carry on insurance business limited to reinsurance within the meaning of section 2(1A) of the Financial Services (Insurance Companies) Act of Gibraltar; and

(c)

would require authorisation in accordance with Article 14 of the Solvency 2 Directive if the United Kingdom were a member State;

“insurance holding company” means a parent undertaking which is not a mixed financial holding company and the main business of which is to acquire and hold participations in subsidiary undertakings, where those subsidiary undertakings are exclusively or mainly insurance or reinsurance undertakings, or Gibraltarian insurance or reinsurance undertakings, or third-country insurance or reinsurance undertakings, at least one of such subsidiary undertakings being an insurance or reinsurance undertaking or a Gibraltarian insurance or reinsurance undertaking;

“method 1” and “method 2” have the meaning given in rule 1.2 of the Group Supervision part of the PRA Rulebook;

“mixed-activity insurance holding company” means a parent undertaking other than an insurance undertaking, a third-country insurance undertaking, a reinsurance undertaking or Gibraltarian insurance or reinsurance undertaking, a third-country reinsurance undertaking, an insurance holding company or a mixed financial holding company, which includes at least one insurance or reinsurance undertaking among its subsidiary undertakings or a Gibraltarian insurance or reinsurance undertaking;

“mixed financial holding company” means a parent undertaking other than a regulated entity, which, together with its subsidiaries, at least one of which is a regulated entity which has its head office in the United Kingdom or in Gibraltar, constitutes a financial conglomerate;

“non-UK solvency 2 parent” means a parent undertaking which is—

(a)

a third-country insurance undertaking, or

(b)

an insurance holding company or mixed financial holding company with its head office outside the United Kingdom and Gibraltar;

“parent undertaking” means—

(a)

a parent undertaking, within the meaning of section 420 of FSMA, or

(b)

an undertaking which, in the opinion of the PRA, effectively exercises a dominant influence over another undertaking;

“participating undertaking” means —

(a)

an undertaking which is either a parent undertaking or other undertaking which holds a participation, or an undertaking linked with another undertaking by a common management relationship, or

(b)

an undertaking which holds, directly or indirectly, voting rights or capital in another undertaking over which, in the opinion of the PRA, it effectively exercises a significant influence;

“regulated entity” has the meaning given in regulation 1(2) of the Financial Conglomerates and Other Financial Groups Regulations 2004 (as amended by the Financial Conglomerates and Other Financial Groups (Amendments etc.) (EU Exit) Regulations 2019), read as if the reference in paragraph (b) of that definition to insurance undertakings and reinsurance undertakings included a reference to Gibraltarian insurance undertakings and Gibraltarian reinsurance undertakings;

“related undertaking” means either a subsidiary undertaking or other undertaking in which a participation is held, or an undertaking linked with another undertaking by a common management relationship;

“Solvency 2 Directive” means Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), as it has effect immediately before IP completion day;

“Solvency 2 Regulation” means Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II);

“subsidiary undertaking” means—

(a)

a subsidiary undertaking, within the meaning of section 420 of FSMA, or

(b)

an undertaking over which, in the opinion of the PRA, a parent undertaking effectively exercises a dominant influence;

“supervisory authority” means the national authority, or the national authorities, empowered to supervise third-country insurance undertakings or third-country reinsurance undertakings;

“third country” means a country other than the United Kingdom or Gibraltar;

“third-country insurance undertaking” means an undertaking which would require authorisation as an insurance undertaking in accordance with the United Kingdom law which implemented Article 14 of the Solvency 2 Directive, if its head office were situated in the United Kingdom but does not include a Gibraltarian insurance undertaking;

“third-country reinsurance undertaking” means an undertaking which if its head office were situated in the United Kingdom—

(a)

would require permission under Part 4A of FSMA to carry out regulated activities relating to reinsurance, and

(b)

immediately before IP completion day, would have required authorisation as a reinsurance undertaking in accordance with Article 14 of the Solvency 2 Directive

but does not include a Gibraltarian reinsurance undertaking;

“UK solvency 2 parent” means a parent undertaking with its head office in the United Kingdom or Gibraltar which is—

(a)

an insurance undertaking or reinsurance undertaking which is a participating undertaking in at least one insurance undertaking, reinsurance undertaking or third-country insurance undertaking,

(b)

an insurance holding company, or

(c)

a mixed financial holding company;

“ultimate non-UK solvency 2 parent” means a non-United Kingdom solvency 2 parent which has no parent undertaking which is a United Kingdom solvency 2 parent or non-United Kingdom solvency 2 parent;

“ultimate UK solvency 2 parent” means a United Kingdom solvency 2 parent which has no parent undertaking which is a United Kingdom solvency 2 parent.]

[F2(1A) In these Regulations, reference to a “group” is to a group of undertakings that—

(a)does not include any undertaking not included in the scope of group supervision in accordance with a direction issued by the PRA under section 138A of FSMA; and

(b)either—

(i)consists of a participating undertaking, its subsidiaries and the entities in which the participating undertaking or its subsidiaries hold a participation, as well as undertakings linked to each other by a common management relationship, or

(ii)is based on the establishment, contractually or otherwise, of strong and sustainable financial relationships among those undertakings, and that may include mutual or mutual-type associations, provided that—

(aa)one of those undertakings effectively exercises, through centralised coordination, a dominant influence over the decisions, including financial decisions, of the other undertakings that are part of the group, and

(bb)the establishment and dissolution of such relationships are subject to prior approval by the PRA.

(1B) For the purposes of paragraph (1A), the undertaking exercising the centralised coordination must be considered as the parent undertaking, and the other undertakings must be considered as subsidiaries.]

(2) Except as provided by paragraph (1) or regulation 38(2)—

(a)any expression used in these Regulations which is defined in section 417 (definitions) or 424 (insurance) of, or Part 1 of Schedule 3 to, FSMA has the meaning given by that section or Part M1;

(b)any other expression used in these Regulations which is used in the Solvency 2 Directive has the meaning which it is given in that Directive M2.

[F3(3) In these Regulations, a reference to the PRA Rulebook is to the rulebook published by the PRA containing rules made by the PRA under FSMA as the rulebook has effect on IP completion day.

(4) In these Regulations, a reference to the United Kingdom law which implemented—

(a)the Financial Conglomerates Directive, or a provision thereof, is to the law of the United Kingdom which was relied on by the United Kingdom immediately before IP completion day to implement Directive 2002/87/EC and its implementing measures;

(b)the capital requirements directive and the capital requirements regulation, or a provision thereof, is to the law of the United Kingdom which was relied on by the United Kingdom immediately before IP completion day to—

(i)implement Directive 2013/36/EU and its implementing measures, and

(ii)enable an EU obligation (within the meaning of Part 2 of Schedule 1 to the European Communities Act 1972, as that Act has effect immediately before IP completion day) under Regulation (EU) No 575/2013 to be implemented;

(c)the Solvency 2 Directive, or a provision thereof, is to the law of the United Kingdom which was relied on by the United Kingdom immediately before IP completion day to implement Directive 2009/138/EU and its implementing measures.

(5) For the purposes of paragraph (4), a reference to the law of the United Kingdom is to the law—

(a)as it has effect on IP completion day, in the case of rules made by the Financial Conduct Authority or by the PRA under FSMA, and

(b)as amended from time to time, in all other cases.]

Textual Amendments

Marginal Citations

M1“FCA”, “insurance undertaking”, “PRA”, “reinsurance undertaking”, “rule” and “Tribunal” are defined in section 417 and “EEA State” is defined in Part 1 of Schedule 3.

M2“Branch”, “parent undertaking”, “reinsurance” and “supervisory authority” are defined in Article 13.

PART 2U.K.Supervision

Exercise of PRA and FCA functionsU.K.

3.—(1) The PRA and FCA must in the exercise of their functions as supervisory authorities under [F4the United Kingdom law which implemented the Solvency 2 Directive]—

F5(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)in times of exceptional movements in the financial markets take into account the potential pro-cyclical effects of their actions.

Textual Amendments

Review of capital add-onsU.K.

4.  Where the PRA imposes a capital add-on, it must review the capital add-on at least once a year.

[F6Non-compliance with solvency capital requirement and exceptional adverse situationsU.K.

4A.—(1) The PRA may extend the period of six months in which an insurance undertaking or reinsurance undertaking must take the measures necessary to achieve the re-establishment of the level of eligible own funds covering the solvency capital requirement or the reduction of its risk profile to ensure compliance with the solvency capital requirement by up to—

(a)three months, or

(b)in the event of a declaration by the Prudential Regulation Committee of the Bank of England under paragraph (2) and considering all relevant factors including the average duration of the technical provisions, seven years.

(2) The Prudential Regulation Committee of the Bank of England must declare the existence of exceptional adverse situations in the conditions set out in paragraph (3).

(3) Exceptional adverse situations exist where the financial situation of insurance or reinsurance undertakings representing a significant share of the market or of the affected lines of business are seriously or adversely affected by one or more of the following conditions—

(a)a fall in financial markets which is unforeseen, sharp and steep;

(b)a persistent low interest rate environment;

(c)a high-impact catastrophic event.

(4) The Prudential Regulation Committee of the Bank of England must assess on a regular basis whether the conditions referred to in paragraph (3) still apply.

(5) The Prudential Regulation Committee of the Bank of England must declare when an exceptional adverse situation has ceased to exist.

(6) An extension granted under paragraph (1)(b) must be withdrawn where the insurance undertaking or reinsurance undertaking submits to the PRA a progress report that shows that there was no significant progress in achieving the re-establishment of the level of eligible own funds covering the solvency capital requirement or the reduction of the risk profile to ensure compliance with the solvency capital requirement between the date of the observation of non-compliance of the solvency capital requirement and the date of the submission of the progress report.]

Textual Amendments

[F6Duty to publish technical informationU.K.

4B.—(1)  For the relevant quarter and every quarter thereafter, by the 8th working day of the month that follows the end of the quarter, the PRA must publish on its website the following information for each relevant currency—

(a)the relevant risk-free interest rate term structure used to calculate the best estimate, without any matching adjustment or volatility adjustment,

(b)for each relevant duration, credit quality and asset class, a fundamental spread for the calculation of the matching adjustment to the relevant risk-free interest rate term structure used to calculate the best estimate for a portfolio of life insurance or reinsurance obligations, and

(c)for each relevant national insurance market, a volatility adjustment to the relevant risk-free interest rate term structure used to calculate the best estimate.

(1A) For the purposes of paragraph (1), the “relevant quarter” is the first quarter which ends after this regulation comes into force.

(2) Paragraph 17(9)(b) of Schedule 6A to the Bank of England Act 1998 does not prohibit the making of a rule that imposes an obligation on PRA-authorised persons by reference to information published by the PRA under this regulation.

(3) The volatility adjustment referred to in paragraph (1) must, for each relevant currency—

(a)be based on the spread between the interest rate that could be earned from the assets included in the reference portfolio for that currency and the rates of the relevant basic risk-free interest rate term structure for that currency, and

(b)correspond to 65% of the risk-corrected currency spread.

(4) The reference portfolio for a currency is one that is representative of the assets which are denominated in that currency and which insurance and reinsurance undertakings are invested in to cover the best estimate for insurance and reinsurance obligations denominated in that currency.

(5) The risk-corrected currency spread must be calculated as the difference between the spread referred to in paragraph (3)(a) and the portion of the spread that is attributable to a realistic assessment of expected losses or unexpected credit or other risk of the assets.

(6) For each relevant country, the volatility adjustment to the risk-free interest rates referred to in paragraph 3(b) for the currency of that country must, before application of the 65% factor, be increased by the difference between the risk-corrected country spread and twice the risk-corrected currency spread, whenever that difference is positive and the risk-corrected country spread is higher than 85 basis points.

(7) For the purposes of paragraph (6), the risk-corrected country spread must be—

(a)calculated in the same way as the risk-corrected currency spread for the currency of that country, but based on a reference portfolio that is representative for the assets which insurance and reinsurance undertakings are invested in, to cover the best estimate for insurance and reinsurance obligations of products sold in the insurance market of that country, and

(b)denominated in the currency of that country.]

Textual Amendments

[F7Powers in relation to Gibraltar undertakingsU.K.

4C.—(1) If this regulation applies, the PRA may impose any requirement in relation to a Gibraltarian insurance undertaking or a Gibraltarian reinsurance undertaking (the Gibraltarian undertaking) which it could impose if—

(a)the undertaking's permission was a Part 4A permission (as defined by section 55A(5) of FSMA); and

(b)the PRA was entitled to exercise its power under section 55M(3) of FSMA.

(2) This regulation applies if—

(a)the Gibraltarian undertaking is contravening, or is at material risk of contravening, in respect of its activities in the United Kingdom, any requirement applying to that undertaking in or under these Regulations, the Solvency 2 Regulation, or UK law which implemented the Solvency 2 directive (“a relevant requirement”);

(b)the undertaking has, in purported compliance with any relevant requirement imposed on it, knowingly or recklessly given the PRA information which is false or misleading in a material particular; or

(c)subject to paragraph (3), it is desirable to impose the requirement in order to advance any of the PRA's objectives.

(3) The PRA may not impose a requirement in reliance on paragraph (2)(c) if doing so would, before IP completion day, have been considered to constitute financial supervision of the undertaking unless the conditions in paragraph (4) are satisfied.

(4) The conditions in this paragraph are satisfied if—

(a)the requirement to be imposed is necessary and appropriate to protect against the risk of disruption to the continuity of financial services that could, in the opinion of the PRA, threaten financial stability in the United Kingdom;

(b)the FSC has not, in the opinion of the PRA, taken measures to ensure the contravention or risk of contravention is remedied; and

(c)no reorganisation measures have been commenced by the FSC or other authorities in Gibraltar in relation to the undertaking.

(5) For the purposes of this regulation, “reorganisation measures” means any measures by the FSC or other Gibraltarian authorities which are intended to preserve or restore the financial situation of the Gibraltar insurance or reinsurance undertaking concerned (“the relevant undertaking”) and which affect pre-existing rights of parties other than the relevant undertaking itself, including but not limited to measures involving the possibility of a suspension of payments, suspension or enforcement measures or reduction of claims.

(6) Nothing in this regulation affects the powers of the FSC or any other Gibraltarian authority.

Textual Amendments

Procedure on the exercise of powers under regulation 4CU.K.

4D.—(1) A requirement takes effect—

(a)immediately, if the notice given under paragraph (3) states that that is the case;

(b)on such date as may be specified in the notice; or

(c)if no date is specified in the notice, when the matter to which it relates is no longer open to review.

(2) A requirement may be expressed to take effect immediately (or on a specified date) only if the PRA, having regard to the ground on which it is exercising the power under regulation 4C, considers that it is necessary for the requirement to take effect immediately (or on that date).

(3) If the PRA proposes to impose a requirement under regulation 4C on a Gibraltar insurance or reinsurance undertaking, or imposes such a requirement with immediate effect, it must give the undertaking written notice.

(4) The notice must—

(a)give details of the requirement;

(b)inform the undertaking of when the requirement takes effect;

(c)state the PRA's reasons for imposing the requirement and for its determination as to when the requirement takes effect;

(d)inform the undertaking that it may make representations to the PRA within such period as may be specified in the notice (whether or not it has referred the matter to the Upper Tribunal); and

(e)inform it of its right to refer the matter to the Upper Tribunal.

(5) The PRA may extend the period allowed under the notice for making representations.

(6) If, having considered any representations made by the undertaking, the PRA decides—

(a)to impose the requirement proposed, or

(b)if it has been imposed, not to rescind the requirement,

it must give the undertaking written notice.

(7) If, having considered any representations made by the undertaking, the PRA decides—

(a)not to impose the requirement proposed,

(b)to impose a different requirement from that proposed, or

(c)to rescind a requirement which has effect,

it must give it written notice.

(8) A notice given under paragraph (6) must inform the undertaking of its right to refer the matter to the Upper Tribunal.

(9) A notice under paragraph (7)(b) must comply with paragraph (4).

(10) If a notice informs a person of the person's right to refer a matter to the Upper Tribunal, it must give an indication of the procedure on such a reference.]

Textual Amendments

Passporting: notification of home state regulatorU.K.

F85.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

EIOPA: informationU.K.

F96.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

EIOPA and EBA: notificationsU.K.

F107.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Other EEA States: informationU.K.

F118.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Non-compliance with the minimum capital requirement: provision of information to other supervisory authoritiesU.K.

F129.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

[F139A.  This Part applies to the following types of groups—

(a) insurance or reinsurance undertakings—

(i)which are a participating undertaking in at least one insurance undertaking, reinsurance undertaking, Gibraltarian insurance undertaking, Gibraltarian reinsurance undertaking, third-country insurance undertaking or third-country reinsurance undertaking; or

(ii)the parent undertaking of which is a Gibraltarian insurance undertaking or a Gibraltarian reinsurance undertaking;

(b)insurance or reinsurance undertakings, the parent undertaking of which is an insurance holding company or a mixed financial holding company which has its head office in the United Kingdom or Gibraltar,

(c)insurance or reinsurance undertakings, the parent undertaking of which is an insurance holding company or a mixed financial holding company which has its head office in a third country or a third-country insurance or reinsurance undertaking, and

(d)insurance or reinsurance undertakings, the parent undertaking of which is a mixed-activity insurance holding company.

Textual Amendments

9B.  Where the participating insurance or reinsurance undertaking, or participating Gibraltarian insurance or reinsurance undertaking or the insurance holding company or the mixed financial holding company referred to in regulation 9A(a) and (b) is a subsidiary undertaking of—

(a)another insurance or reinsurance undertaking,

(aa)another Gibraltar insurance or reinsurance undertaking;

(b)another insurance holding company, or

(c)another mixed financial holding company,

which has its head office in the United Kingdom or Gibraltar, the United Kingdom law which implemented Articles 218 to 258 of the Solvency 2 Directive apply only at the level of the ultimate UK solvency 2 parent which has its head office in the United Kingdom or in Gibraltar.]

Textual Amendments

PART 3U.K.Groups

CHAPTER 1U.K.Cases of application and scope

Risk concentration and intra-group transactionsU.K.

10.  Where the PRA is the group supervisor [F14of a type of group referred to in regulation 9A(a) or (b)], the PRA may decide not to supervise risk concentration or intra-group transactions within the group at a level specified in the first column of Table 1 where all the conditions specified in relation to that level in the second column of Table 1 are satisfied.

Table 1
Levels at which supervision need not be exercisedConditions to be satisfied
The participating undertaking, insurance holding company and mixed financial holding company.The group contains an insurance undertaking or reinsurance undertaking and either—
(a) the parent undertaking of the [F15insurance undertaking, Gibraltarian insurance undertaking, reinsurance undertaking or Gibraltarian reinsurance undertaking] is an insurance holding company or a mixed financial holding company which has its head office in [F16the United Kingdom or Gibraltar]; or
(b) the [F15insurance undertaking, Gibraltarian insurance undertaking, reinsurance undertaking or Gibraltarian reinsurance undertaking] is a participating undertaking in at least one insurance undertaking, reinsurance undertaking, [F17Gibraltarian insurance undertaking, Gibraltarian reinsurance undertaking,] third-country insurance undertaking or third-country reinsurance undertaking;
The participating undertaking, insurance holding company or mixed financial holding company referred to above is, or is a related undertaking of, a regulated entity or mixed financial holding company subject to supplementary supervision [F18by the FCA, where the FCA is the supplementary supervisor, or the PRA] in accordance with [F19the United Kingdom law which implemented] Article 5(2) of the Financial Conglomerates Directive.
The PRA has consulted the [F20FCA].
The ultimate [F21UK solvency 2 parent].The parent undertaking of an ultimate [F21UK solvency 2 parent] is subject to supplementary supervision in accordance with [F22the law of the United Kingdom or of Gibraltar which was relied on by the United Kingdom or Gibraltar respectively immediately before IP completion day to implement] Article 5(2) of the Financial Conglomerates Directive.

Textual Amendments

Equivalent provisionsU.K.

11.—(1) This regulation applies where the PRA is the group supervisor of a group which includes a mixed financial holding company.

[F23(2) Where the mixed financial holding company is subject to equivalent provisions under the United Kingdom law which implemented the Solvency 2 Directive and the United Kingdom law which implemented the Financial Conglomerates Directive, the PRA may apply only the relevant provisions of the United Kingdom law which implemented the Financial Conglomerates Directive to the mixed financial holding company.]

(3) Before exercising its discretion under paragraph (2), the PRA must consult the [F24FCA, where there is a firm in the group that is authorised and regulated by the FCA].

[F25(4) Where the mixed financial holding company is subject to equivalent provisions under the United Kingdom law which implemented the following two sets of legislation—

(a)the Solvency 2 Directive, and

(b)the capital requirements directive and the capital requirements regulation,

the PRA may apply only the United Kingdom law relating to the most significant sector, as determined in accordance with the United Kingdom law which implemented Article 3(2) of the Financial Conglomerates Directive.]

F26(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Exclusion of undertaking from group supervisionU.K.

F2712.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

CHAPTER 2U.K.Levels

Supervision of parents and subgroups at national level: substantive powersU.K.

[F2813.  The PRA may supervise an ultimate UK solvency 2 parent at group level in the United Kingdom where—

(a)the ultimate UK solvency 2 parent has its head office in Gibraltar; and

(b)the PRA is not the group supervisor.]

Textual Amendments

Supervision of parents and subgroups at national level: procedureU.K.

[F2914.—(1) The PRA must follow the procedure set out in this regulation when supervising an ultimate UK solvency 2 parent under regulation 13(1).

(2) Before deciding to exercise supervision, the PRA must consult the FSC and the ultimate UK solvency 2 parent.

(3) If the PRA decides to exercise supervision, the PRA must explain its decision to both the FSC and the ultimate UK solvency 2 parent.

(4) The PRA must recognise and apply any permission granted pursuant to the laws of Gibraltar which were relied on immediately before IP completion day to implement Article 231 or 233(5) of the Solvency 2 Directive, as those laws are amended from time to time, to the ultimate UK solvency 2 parent to calculate the group solvency capital requirement for insurance undertakings, reinsurance undertakings, Gibraltarian insurance undertakings and Gibraltarian reinsurance undertakings in the group on the basis of an internal model.]

Textual Amendments

CHAPTER 3U.K.Group Solvency

Supervision of group solvency and frequency of calculationU.K.

[F3015.—(1) Subject to paragraph (2), where the PRA is the group supervisor of a type of group referred to in regulation 9A(a) or (b), the PRA must—

(a)ensure that the calculations referred to in rules 4.1 and 4.2 of the Group Supervision part of the PRA Rulebook are carried out at least annually to ensure that the group has adequate financial resources at the level of the ultimate UK solvency 2 parent,

(b)conduct supervisory reviews to determine whether the insurance undertakings or reinsurance undertakings in the group are complying with the requirement to ensure that the group has adequate financial resources at the level of the ultimate UK solvency 2 parent, and

(c)where the group is not headed by an insurance undertaking or reinsurance undertaking, Gibraltarian insurance undertaking or Gibraltarian reinsurance undertaking, consult the undertakings in the group before identifying an undertaking other than an insurance holding company or a mixed financial holding company to supply relevant data for, and the results of, the calculations referred to in paragraph (1)(a).

(2) Subject to paragraph (3), where the PRA is required to rely on supervision exercised by a supervisory authority in a third country which has a prudential group supervision regime which is determined as equivalent in accordance with regulation 35, the PRA may determine that paragraph (1)—

(a)does not apply, or

(b)applies with only such modifications as may be specified in the determination.

(3) The PRA may not give a determination under paragraph (2) unless it is satisfied that—

(a)compliance by insurance or reinsurance undertakings in the group with rules or requirements imposed by the PRA pursuant to paragraph (1) would be unduly burdensome; and

(b)the determination would not adversely affect the advancement of any of the PRA's objectives.

(4) The PRA may revoke or vary a determination given under paragraph (2).]

Textual Amendments

Choice of methodU.K.

16.—(1) Where the PRA is the group supervisor of a group, the PRA must consult the group [F31and the FSC, if the FSC is] concerned in the supervision of the group before requiring the group to use method 2, or a combination of method 1 and method 2, for the calculation of solvency at a group level.

(2) Where the PRA is not the group supervisor, the PRA must apply the method chosen by the group supervisor for the ultimate [F32UK] solvency 2 parent in relation to—

(a)group supervision at a national level in accordance with regulation 13(1); and

F33(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Inclusion of proportional shareU.K.

17.—(1) In this regulation, “proportional share” means the proportional share held by a participating undertaking in its related undertakings.

(2) The PRA must determine the proportional share which must be taken into account in the calculation of group solvency where—

(a)the PRA is the group supervisor of a group; and

(b)any of the following applies—

(i)there are no capital ties between any of the undertakings in a group;

(ii)[F34the PRA (or, if paragraph (5) applies, the FSC)] has determined that the direct or indirect holding of voting rights or capital in an undertaking qualifies as a participation because the holding means that a significant influence is effectively exercised over that undertaking;

(iii)[F35the PRA (or, if paragraph (5) applies, the FSC)] has determined that an undertaking is a parent undertaking because the undertaking effectively exercises a dominant influence over the other undertaking.

(3) Before determining the proportional share, the PRA must consult the undertakings in the group [F36and, if paragraph (5) applies, the FSC].

[F37(4) The PRA may allow for the solvency deficit of the subsidiary undertaking to be considered on a proportional basis where, in the opinion of the PRA, the responsibility of the parent undertaking owning a share of the capital is strictly limited to that share of the capital.

(5) This paragraph applies if—

(a)the FSC is concerned in the supervision of the group; or

(b)the group contains a Gibraltarian insurance undertaking or a Gibraltarian reinsurance undertaking.]

Textual Amendments

Related undertakings: calculation of group solvencyU.K.

18.—(1) This regulation applies where—

(a)the PRA is the group supervisor of a group;

(b)the group contains at least three insurance undertakings, reinsurance undertakings [F38Gibraltarian insurance undertakings, Gibraltarian reinsurance undertakings], insurance holding companies or mixed financial holding companies (“A”, “B” and “C”);

(c)A and B are related undertakings;

(d)A and C are related undertakings; and

(e)either B or C has its head office in [F39Gibraltar].

(2) Except where paragraph (3) applies, the PRA must permit the group, in the calculation of group solvency, to take into account national laws which—

(a)are adopted by [F40Gibraltar] to implement the solvency capital requirement and the requirements relating to the own funds eligible to satisfy the solvency capital requirement; and

(b)apply to B or C (as the case may be).

(3) This paragraph applies where—

(a)there is a significant change to the national laws referred to in paragraph (2); and

(b)it is not in the interests of the group's policyholders to take into account the national laws referred to in paragraph (2).

Textual Amendments

Participating undertakings: calculation of group solvencyU.K.

19.—(1) This regulation applies where—

(a)the PRA is the group supervisor of a group;

(b)the group contains an insurance undertaking [F41, reinsurance undertaking, Gibraltarian insurance undertaking or Gibraltarian reinsurance undertaking] [F42for which the calculation of the group solvency includes] a third-country insurance undertaking or third-country reinsurance undertaking; and

(c)the third country in which the third-country insurance undertaking or third country reinsurance undertaking has its head office makes it subject to authorisation and imposes on it a solvency regime at least equivalent to that specified in [F43the United Kingdom law which implemented] Chapter 6 of Title 1 of the Solvency 2 Directive.

(2) The PRA must permit the group to take into account national laws adopted by the third country in respect of the group's solvency capital requirement and the own funds eligible to satisfy the solvency capital requirement in the calculation of the group's solvency unless—

(a)there has been a significant change to those national laws; and

(b)it is not in the interests of the group's policyholders to do so.

[F44(2A) Where the Treasury have made regulations under Article 379A of the Solvency 2 Regulation, or the Commission have adopted a delegated act under Article 227 of the Solvency 2 Directive prior to IP completion day, determining that the supervisory regime of a third country is provisionally equivalent, that third country is deemed to be equivalent for the purposes of paragraph (2).]

[F45(3) Where no regulations have been made by the Treasury pursuant to Article 379A of the Solvency 2 Regulation, and the Commission has not adopted a delegated act under Article 227 of the Solvency 2 directive prior to IP completion day, the PRA—

(a)may on its own initiative, or

(b)must on the request of the insurance or reinsurance undertaking or Gibraltarian insurance or reinsurance undertaking for which the calculation of the group solvency includes a third-country insurance undertaking or third-country reinsurance undertaking,

verify whether a solvency regime in the third country is at least equivalent to the United Kingdom law which implemented Chapter 6 of Title 1, of the Solvency 2 Directive.]

(4) The PRA must—

F46(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)take the decision in accordance with the criteria set out in [F47Article 379 of the Solvency 2 Regulation]; and

(c)ensure that its decision does not contradict any previous decision on the equivalence of the third country, except where it is necessary to take into account significant changes to the supervisory regime laid down in [F48the United Kingdom law which implemented] Chapter 6 of Title 1 to the Solvency 2 Directive or to the solvency regime of the third country.

[F49(5) The PRA must publish and keep up to date on its website a list of all third countries referred to in paragraph (3).]

Textual Amendments

[F50Gibraltar undertakings: calculation of group solvencyU.K.

19A.—(1) This regulation applies where—

(a)the PRA is the group supervisor of a group;

(b)the group contains—

(i)a Gibraltarian insurance undertaking,

(ii)a Gibraltarian reinsurance undertaking, or

(iii)an insurance undertaking or a reinsurance undertaking for which the calculation of the group solvency includes an undertaking in paragraph (i) or (ii).

(2) The PRA must permit the group to take into account laws adopted by Gibraltar in respect of the group's solvency capital requirement and the own funds eligible to satisfy the solvency capital requirement in the calculation of the group's solvency.]

Textual Amendments

Internal models and capital add-onsU.K.

20.—(1) Where group solvency is determined in accordance with method 1, the PRA must pay particular attention to F51... where—

(a)a specific risk existing at group level would not be sufficiently covered by the standard formula or the internal model used because it is difficult to quantify; or

(b)a capital add-on to the solvency capital requirement of the related insurance undertaking or reinsurance undertakings is imposed by the [F52PRA or, where there is a Gibraltarian insurance undertaking or a Gibraltarian reinsurance undertaking, the FSC] F53....

(2) Where group solvency is determined in accordance with method 2, the PRA must, when it determines whether the aggregated group solvency capital requirement appropriately reflects the risk profile of the group, pay particular attention to any specific risks existing at group level which would not be sufficiently covered because they are difficult to quantify.

(3) Where F54... the PRA considers that the risk profile of an insurance undertaking or reinsurance undertaking belonging to a group deviates significantly from the assumptions underlying the internal model approved at group level, the PRA may—

(a)impose a capital add-on to the solvency capital requirement of the insurance undertaking or reinsurance undertaking;

(b)in exceptional circumstances where a capital add-on would not be appropriate, require the insurance undertaking or reinsurance undertaking to calculate its solvency capital requirement on the basis of the standard formula; or

(c)where the PRA has exercised its discretion under sub-paragraph (b) to require an insurance undertaking or reinsurance undertaking to calculate its solvency capital requirement on the basis of the standard formula, impose a capital add-on to the solvency capital requirement.

(4) Where the PRA—

(a)imposes a capital add-on on an insurance undertaking or reinsurance undertaking; or

(b)requires the insurance undertaking or reinsurance undertaking concerned to calculate its solvency capital requirement on the basis of the standard formula,

the PRA must explain its decision to the relevant insurance undertaking or reinsurance undertaking F55....

(5) [F56Where the FSC is the group supervisor], the PRA must adopt and apply the following decisions by the group supervisor on the basis of an internal model—

(a)the calculation of the group solvency capital requirement;

(b)the calculation of the solvency capital requirement of an insurance undertaking and reinsurance undertaking in the group;

(c)the calculation of the aggregated group solvency capital requirement.

(6) Where the PRA has imposed a capital add-on, it must review the capital add-on at least once a year.

Textual Amendments

Subsidiaries: solvency capital requirementU.K.

F5721.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Subsidiaries: non-compliance with the solvency and minimum capital requirementsU.K.

F5822.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Subsidiaries: revocation of approval for applying Articles 238 and 239 of the Solvency 2 DirectiveU.K.

F5923.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

CHAPTER 4U.K.Risk concentration and intra-group transactions

Supervision of risk concentration and intra-group transactionsU.K.

24.—(1) [F60Subject to paragraph (4), where] the PRA is the group supervisor [F61of a type of group referred to in regulation 9A(a) or (b)], the PRA must—

(a)identify the type of risks and intra-group transactions which insurance undertakings and reinsurance undertakings in the group must report to the PRA in all circumstances, taking into account the specific group and risk management structure of the group;

(b)impose appropriate thresholds based on solvency capital requirements, or technical provisions, in order to identify which significant risk concentrations and significant intra-group transactions should be reported;

(c)identify the insurance undertaking or reinsurance undertaking in the group responsible for submitting the information required under rules implementing Articles 244 and 245 of the Solvency 2 Directive where the group is not headed by an insurance undertaking or a reinsurance undertaking;

(d)review the risk concentrations of the group and intra-group transactions at group level, and in particular monitor the possible risk of contagion within the group, the risk of a conflict of interests and the level or volume of risks.

[F62(1A) For the purposes of paragraph (1), references to insurance undertakings and reinsurance undertakings include a reference to Gibraltarian insurance undertakings and Gibraltarian reinsurance undertakings.]

(2) The PRA must consult the group [F63and, where the FSC is concerned in the supervision of the group, the FSC] whilst carrying out the activities referred to in sub-paragraphs (a) to (c) of paragraph 24.

(3) Where the [F64FSC is ] the group supervisor and the [F65the FSC consults the PRA] in relation to the supervision of risk concentration at group level or the reporting of intra-group transactions, the PRA must take into account the specific group and risk management structure of the group when giving its opinion about the type of risks to be reported.

[F66(4) Where the PRA is required to rely on supervision exercised by a supervisory authority in a third country which has a prudential group supervision regime determined as equivalent in accordance with regulation 35, the PRA may determine that paragraph (1)—

(a)does not apply; or

(b)applies with only such modifications as may be specified in the determination.

(5) The PRA may not give a determination under paragraph (4) unless it is satisfied that—

(a)compliance by insurance or reinsurance undertakings in the group with rules or requirements imposed by the PRA pursuant to paragraph (1) would be unduly burdensome; and

(b)the determination would not adversely affect the advancement of any of the PRA’s objectives.

(6) The PRA may revoke or vary a determination given under paragraph (4).]

Textual Amendments

Modifications etc. (not altering text)

CHAPTER 5U.K.Risk management and internal control

Supervision of system of governanceU.K.

[F6725.—(1) Subject to paragraph (2), where the PRA is the group supervisor of a type of group referred to in regulation 9A(a) or (b) the PRA must—

(a)review the systems and reporting procedures implemented by the group in accordance with rules implementing paragraphs 1 and 2 of Article 246 of the Solvency 2 Directive;

(b)review the own-risk and solvency assessment conducted at group level by the group in accordance with rules implementing paragraph 4 of Article 246 of the Solvency 2 Directive.

(2) Where the PRA is required to rely on supervision exercised by a supervisory authority in a third country which has a prudential group supervision regime determined as equivalent in accordance with regulation 35, the PRA may determine that paragraph (1)—

(a)does not apply; or

(b)applies with only such modifications as may be specified in the determination.

(3) The PRA may not give a determination under paragraph (2) unless it is satisfied that—

(a)compliance by insurance or reinsurance undertakings in the group with rules or requirements imposed by the PRA pursuant to paragraph (1) would be unduly burdensome; and

(b)the determination would not adversely affect the advancement of any of the PRA’s objectives.

(4) The PRA may revoke or vary a determination given under paragraph (2).]

Textual Amendments

Modifications etc. (not altering text)

CHAPTER 6U.K.Measures to facilitate group supervision

Rule for deciding the group supervisorU.K.

[F6826.—(1) [F69Subject to paragraphs (2) and (3)], where an insurance undertaking or reinsurance undertaking that is authorised by the PRA under Part 4A of FSMA is part of a group, the PRA is the group supervisor and must supervise that group.

(2) The FSC is the group supervisor and must supervise that group where the group includes a Gibraltarian insurance undertaking or a Gibraltarian reinsurance undertaking and—

(a)the FSC was designated as the group supervisor under Article 247 of the Solvency 2 Directive before IP completion day; or

(b)the PRA and the FSC have agreed that the FSC is to be the group supervisor.]

[F70(3) Nothing in this regulation requires the PRA to conduct group supervision in respect of requirements which do not apply, as may be determined by the PRA under regulation 15, 24, 25 or 28.]

Textual Amendments

Exceptions to the rule for deciding the group supervisorU.K.

F7127.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Duties of group supervisor F72...U.K.

28.—(1) [F73Subject to paragraph (3), paragraph (2) applies] where the PRA is the group supervisor [F74of a type of group referred to in regulation 9A(a) or (b)] , F75....

(2) The PRA must—

F76(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)conduct supervisory reviews and assessments of the financial situation of the group;

(c)assess the group's compliance with the rules on solvency, risk concentration and intra-group transactions F77...;

(d)assess the group's system of governance in accordance with regulation 25;

(e)assess whether the members of the administrative, management or supervisory body of the participating undertakings in the group [F78are fit and proper to carry out their functions];

F79(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(g)[F80determine applications for] an internal model at group level as set out in regulation 49;

F81(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(i)carry out the other tasks, measures and decisions assigned to the group supervisor by the [F82United Kingdom law which implemented the] Solvency 2 Directive.

[F83(3) Where the PRA is required to rely on supervision exercised by a supervisory authority in a third country which has a prudential group supervision regime determined as equivalent in accordance with regulation 35, the PRA may determine that paragraph (2)—

(a)does not apply; or

(b)applies with only such modifications as may be specified in the determination.

(4) The PRA may not give a determination under paragraph (3) unless it is satisfied that —

(a)compliance by insurance or reinsurance undertakings in the group with rules or requirements imposed by the PRA pursuant to paragraph (2) would be unduly burdensome; and

(b)the determination would not adversely affect the advancement of any of the PRA’s objectives.

(5) The PRA may revoke or vary a determination given under paragraph (3).]

F84(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F84(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F84(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F84(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F84(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F84(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Modifications etc. (not altering text)

Cooperation and exchange of information between supervisory authoritiesU.K.

F8529.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Consultation between supervisory authoritiesU.K.

F8630.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Access to informationU.K.

F8731.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Verification of informationU.K.

F8832.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Group solvency and financial condition reportU.K.

F8933.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Enforcement measuresU.K.

F9034.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

CHAPTER 7U.K.Third countries

Non-EEA solvency 2 parent undertakings: equivalenceU.K.

[F9135.—(1) The PRA must rely on the equivalent group supervision exercised by third country supervisory authorities, where the condition in paragraph (2) is met, or the alternative condition in paragraph (3) is met.

(2) The condition is that—

(a)either of the following determinations have been made—

(i)the Treasury have made regulations under regulation 380A(1) of the Solvency 2 Regulation, or the Commission has adopted a delegated act under Article 260(3) of the Solvency 2 Directive prior to IP completion day, determining that the prudential regime of the third country is equivalent, or

(ii)the Treasury have made regulations under regulation 380A(4) of the Solvency 2 Regulation, or the Commission has adopted a delegated act under Article 260(5) of the Solvency 2 Directive prior to IP completion day, determining that the prudential regime of the third country is temporarily equivalent,

(b)that determination still applies,

(c)there is no insurance undertaking or reinsurance undertaking situated in the United Kingdom with a balance sheet total that exceeds the balance sheet total of the parent undertaking situated in the third country, and

(d)the PRA has verified that the that the group is subject to supervision by a third-country supervisory authority in accordance with that equivalent or temporarily equivalent regime.

(3) The alternative condition is that the PRA has verified that the group is subject to supervision by a third country supervisory authority which is equivalent in accordance with paragraph (4).

(4) Where the conditions referred to in paragraph (2) do not apply, the PRA—

(a)must take a decision on equivalence at the request of the parent undertaking or the insurance undertaking or reinsurance undertaking; or

(b)may take a decision on equivalence on its own initiative,

in accordance with paragraph (5).

(5) Where the PRA takes a decision on equivalence, the PRA must—

(a)verify equivalence at the level of the ultimate non-UK solvency 2 parent,

(b)ensure that its decision on equivalence does not contradict any previous decision taken in relation to the third country, except where it is necessary to do so in order to take into account significant changes to the supervisory regime laid down in Part 3 of these Regulations and the PRA Rulebook on Group Supervision or to the supervisory regime in the third country, and

(c)take its decision on equivalence in accordance with the criteria set out in Regulation 380 of the Solvency 2 Regulation.

(6) Paragraph (7) applies where the PRA is required to rely on supervision exercised by a supervisory authority in a third country which, in accordance with paragraph (2) or (3), has a prudential group supervision regime which is determined as equivalent to Part 3 of these Regulations and the PRA Rulebook on Group Supervision (but see paragraph (8)).

(7) The PRA must consult the other members of the college of supervisors before taking a decision which is of importance to the supervisory tasks of another supervisory authority with regard to—

(a)changes in the shareholder, organisational or management structure of insurance undertakings or reinsurance undertakings in the group, which require the approval or authorisation of the other supervisory authority,

(b)a decision on the extension of the recovery period under rule 3.1(3) of the Undertakings in Difficulty part, and rule 4.4 of the Group Supervision part, of the PRA Rulebook, or

(c)the imposition of a capital add-on, a limitation on the use of an internal model for calculating the solvency capital requirement, or any other major sanctions or exceptional measures taken by the other supervisory authority.

(8) Paragraph (7) does not apply—

(a)in cases of urgency, or

(b)where consultation may jeopardise the effectiveness of a decision of the PRA,

provided the PRA informs the other supervisory authorities concerned without delay.

(9) The PRA must also consult a supervisory authority before taking a decision based on information received from that supervisory authority.]

Textual Amendments

Parent undertaking outside the United Kingdom: absence of equivalenceU.K.

[F9236.—(1) This regulation applies where—

(a)a parent undertaking of an insurance undertaking or reinsurance undertaking established in the United Kingdom has its head office in a third country,

(b)one of the conditions in paragraph (2) is satisfied, and

(c)one of the conditions in paragraph (3) is satisfied.

(2) The conditions are—

(a)the prudential group supervision regime of the third country has not been determined to be equivalent by the Treasury or the PRA, and the Commission has not adopted a delegated act under Article 260(3) of the Solvency 2 Directive prior to IP completion day, determining that the prudential regime of the third county is equivalent to Title 3 of the Solvency 2 Directive;

(b)the prudential group supervision regime has been determined to be equivalent by the Treasury, the PRA or the Commission, but the PRA has not verified that the group is subject to supervision by a third-country supervisory authority in accordance with that equivalent regime.

(3) The conditions are—

(a)the prudential group supervision regime of the third country has not been determined to be temporarily equivalent;

(b)if the prudential group supervision regime of the third country has been determined to be temporarily equivalent, the group is not subject to that regime or the group contains an insurance undertaking or reinsurance undertaking in the United Kingdom with a balance sheet total that exceeds the balance sheet total of the parent undertaking situated in the third country.

(4) The PRA must, at the level of the ultimate non-UK solvency 2 parent—

(a)ensure appropriate supervision of the insurance undertakings and reinsurance undertakings that are authorised by the PRA in the group, and

(b)ensure the objectives of group supervision are achieved.

(5) The PRA may require the group to establish an insurance holding company or mixed financial holding company with its head office in the United Kingdom.]

Textual Amendments

[F93Parent undertakings outside the United Kingdom: levelsU.K.

36A.—(1) Where the parent undertaking of an insurance undertaking or reinsurance undertaking with its head office outside the United Kingdom is itself a subsidiary of—

(a)an insurance holding company or a mixed financial holding company which has its head office in a third country, or

(b)a third-country insurance or reinsurance undertaking,

regulation 35 only applies at the level of the ultimate parent undertaking which is a third-country insurance holding company, a third-country mixed financial holding company, a third-country insurance undertaking or a third- country reinsurance undertaking.

(2) The PRA may, in the absence of equivalent supervision referred to in regulation 35, carry out a new verification of equivalence at a lower level where a parent undertaking of insurance or reinsurance undertakings exists, whether at the level of a third-country insurance holding company, a third country mixed financial holding company, a third-country insurance undertaking or a third-country reinsurance undertaking.

(3) Where paragraph (2) applies, regulation 35 applies with any necessary changes at that lower level.

(4) Where paragraph (2) applies, the PRA must explain its decision to the group to which the insurance undertaking or reinsurance undertaking belongs.]

Textual Amendments

CHAPTER 8U.K.Mixed-activity insurance holding companies

Intra-group transactionsU.K.

37.—(1) This regulation applies where—

(a)the parent undertaking of one or more insurance undertakings or reinsurance undertakings in the group is a mixed-activity insurance holding company; and

(b)the PRA supervises one or more of the insurance undertakings or reinsurance undertakings in the group.

(2) The PRA must exercise general supervision over transactions between—

(a)the mixed-activity holding company and its related undertakings; and

(b)the insurance undertakings or reinsurance undertakings supervised by the PRA.

[F94(3) The requirements in regulation 24 apply to the transactions specified in paragraph (2).]

Textual Amendments

PART 4U.K.Approvals

Modifications etc. (not altering text)

CHAPTER 1U.K.Procedure: applications

Meaning of “approval”, “group application” [F95and “protected item”] U.K.

38.—(1) In this Part F96...—

“approval” means an approval granted by the PRA under this Part;

“group application” means an application for permission to calculate any of the following matters in accordance with an internal model—

(i)

the consolidated group solvency capital requirement for a group and the solvency capital requirements for the insurance undertakings [F97, reinsurance undertakings, Gibraltarian insurance undertakings and Gibraltarian reinsurance undertakings ] in the group in accordance with method 1 M3;

(ii)

the aggregated group solvency capital requirement in relation to group solvency determined in accordance with method 2 M4; and

“protected item” has the same meaning as in section 413 of FSMA.

F98(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Marginal Citations

M3See Article 231 of the Solvency 2 Directive.

M4See Article 233(5) of the Solvency 2 Directive.

Applications: eligibility, process, information and documentsU.K.

39.—(1) This regulation applies to an application to the PRA for—

(a)the grant of an approval; or

(b)a variation of an existing approval.

(2) An insurance undertaking, reinsurance undertaking or third-country insurance undertaking may apply for an approval under regulations 41 to 48, 53 and 54 only if it is authorised under Part 4A of FSMA.

(3) [F99An] application must—

(a)be made in such manner as the PRA may direct; and

(b)contain, or be accompanied by, such other information or documents as the PRA may reasonably require.

(4) At any time after receiving the application and before determining it, the PRA may require the undertaking to provide it with such further information or documents as it may reasonably require.

(5) The PRA may require any information provided under this regulation to be provided in such form and verified in such manner as it may reasonably require.

(6) The PRA may require any documents provided under this regulation to be produced at such place and authenticated in such manner as it may reasonably require.

(7) Different directions may be given, and different requirements imposed, in relation to different applications or categories of application.

(8) The powers conferred on the PRA by this regulation—

(a)must be exercised in accordance with any directly applicable regulation [F100that forms part of retained EU law] made under the Solvency 2 Directive; and

(b)may not be used to require the production of a protected item.

F101(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) Where an application has been made to the PRA under regulation 43 (volatility adjustment), paragraphs (3)(b) and (4) may only be used to require—

(a)a liquidity plan projecting the incoming and outgoing cash flows in relation to the assets and liabilities subject to the volatility adjustment;

(b)where the disapplication of the volatility adjustment would result in the undertaking failing to meet the solvency capital requirement, an analysis of the measures the undertaking could apply to re-establish the level of own funds covering the solvency capital requirement or reduce its risk profile to restore compliance with the solvency capital requirement;

(c)the undertaking's written policy on risk management;

(d)an assessment of the undertaking's compliance with the [F102solvency capital requirement and minimum capital requirement]—

(i)when the volatility adjustment is applied; and

(ii)when the volatility adjustment is not applied.

Textual Amendments

Additional process: applications from groups and applications to more than one supervisory authorityU.K.

F10340.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

CHAPTER 2U.K.Specific Approvals

Verification that the Solvency 2 Directive does not applyU.K.

41.—(1) An insurance undertaking may apply to the PRA for verification that the conditions specified in [F104the United Kingdom law which implemented Article 4(4) of the Solvency 2 Directive] are satisfied.

(2) Where the PRA receives an application under paragraph (1), the PRA may approve the application.

(3) The PRA may revoke an approval granted under paragraph (2) where the conditions specified in [F104the United Kingdom law which implemented Article 4(4) of the Solvency 2 Directive] cease to be satisfied.

Textual Amendments

Matching adjustmentU.K.

42.—(1) An insurance undertaking, reinsurance undertaking or third-country insurance undertaking may apply to the PRA for permission to apply a matching adjustment to a risk-free interest rate term structure in order to calculate the best estimate of a portfolio of life insurance or reinsurance obligations.

(2) The PRA must approve an application made under paragraph (1) if the conditions specified in paragraph (4) would be satisfied if approval were granted.

(3) The PRA must revoke an approval granted under paragraph (2) if an undertaking fails to comply with a condition specified in sub-paragraphs (a) to (k) of paragraph (4) in relation to that approval for a period of two months or more.

(4) The conditions referred to in paragraphs (2) and (3) are—

(a)the undertaking assigns a portfolio of assets, consisting of bonds or other assets with similar cash flow characteristics, to cover the best estimate of the portfolio of insurance or reinsurance obligations;

(b)the undertaking maintains the assignment referred to in sub-paragraph (a) over the lifetime of the obligations, except for the purpose of maintaining the replication of expected cash flows between assets and liabilities where the cash flows have materially changed;

(c)the portfolio of insurance or reinsurance obligations to which the matching adjustment is applied and the assigned portfolio of assets are—

(i)identified; and

(ii)organised and managed separately from the other activities of the undertaking;

(d)the assigned portfolio of assets referred to in sub-paragraph (c) cannot be used to cover losses arising from the other activities of the undertaking;

(e)the expected cash flows of the assigned portfolio of assets replicate each of the expected cash flows of the portfolio of insurance or reinsurance obligations in the same currency;

(f)any mismatch between the expected cash flows referred to in sub-paragraph (e) does not give rise to risks which are material in relation to the risks inherent in the insurance business to which the matching adjustment is applied;

(g)the contracts underlying the portfolio of insurance or reinsurance obligations do not give rise to future premium payments;

(h)the only underwriting risks connected to the portfolio of insurance or reinsurance obligations are longevity risk, expense risk, revision risk or mortality risk;

(i)where the underwriting risk connected to the portfolio of insurance or reinsurance obligations includes mortality risk, the best estimate of the portfolio of insurance or reinsurance obligations does not increase by more than 5% under a mortality risk stress that is calibrated in accordance with rules implementing paragraphs (2) to (5) of Article 101 of the Solvency 2 Directive;

(j)the contracts underlying the insurance or reinsurance obligations include—

(i)no options for the policyholder; or

(ii)only a surrender option with a surrender value not exceeding the value of the assets, valued in accordance with [F105rules 2.1 and 2.2 of the Valuation part of the PRA Rulebook], covering the insurance or reinsurance obligations at the time the surrender option is exercised;

(k)the cash flows of the assigned portfolio of assets are—

(i)fixed and cannot be changed by the issuers of the assets or any third parties; or

(ii)fixed except for a dependence on inflation, and the assets replicate the cash flows of the portfolio of insurance or reinsurance obligations that depend on inflation;

(l)the undertaking does not apply a volatility adjustment to the risk free interest rate term structure in accordance with an approval granted under regulation 43;

(m)the undertaking does not apply a transitional measure to the risk free interest rates in accordance with an approval granted under regulation 53;

(n)the undertaking has not ceased to apply a matching adjustment to the risk-free interest rate term structure in the 24 months prior to the application.

(5) For the purposes of paragraph (4), the insurance or reinsurance obligations of an insurance or reinsurance contract must not be split into different parts when composing the portfolio of insurance or reinsurance obligations.

(6) For the purposes of sub-paragraph (4)(k)(i), where issuers or third parties have the right to change the cash flows of an asset, that right does not disqualify the asset from admissibility to the assigned portfolio, provided the investor receives sufficient compensation to allow it to obtain the same cash flow by re-investing the compensation in assets of an equivalent or better quality.

(7) In this regulation, “life insurance and reinsurance obligations”—

(a)includes annuities stemming from non-life insurance or reinsurance contracts; [F106and]

(b)in the case of a third-country insurance undertaking F107..., refers only to insurance and reinsurance obligations assumed in the United Kingdom; F108...

F109(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Volatility adjustmentU.K.

43.—(1) An insurance undertaking, reinsurance undertaking or third-country insurance undertaking may apply to the PRA for permission to apply a volatility adjustment to the relevant risk-free interest rate term structure in order to calculate the best estimate referred to in Article 77(2) of the Solvency 2 Directive.

(2) The PRA must approve an application made under paragraph (1) if the proposed application of the volatility adjustment would satisfy all the conditions specified in paragraph (4).

(3) The PRA must revoke an approval granted under paragraph (2) where the application of the volatility adjustment does not satisfy a condition specified in paragraph (4).

(4) The conditions referred to in paragraphs (2) and (3) are—

(a)the volatility adjustment is applied correctly to the relevant risk-free interest rate term structure in order to calculate the best estimate;

(b)the undertaking does not breach a relevant requirement as a result or consequence of applying the volatility adjustment;

(c)the application of the volatility adjustment does not create an incentive for the undertaking to engage in pro-cyclical investment behaviour.

(5) In paragraph (4)(b), a “ relevant requirement” is—

(a)a requirement imposed by or under FSMA in pursuance of [F110the United Kingdom law which implemented] the Solvency 2 Directive; or

(b)a requirement of a directly applicable regulation made under the Solvency 2 Directive [F111which forms part of retained EU law].

Textual Amendments

Supervisory approval of ancillary own-fundsU.K.

44.—(1) An insurance undertaking, reinsurance undertaking or third-country insurance undertaking may apply to the PRA for permission to take the amount of an ancillary own-fund item into account when determining its own funds in accordance with rules implementing Article 90 of the Solvency 2 Directive and any directly applicable regulations made under Article 92.

(2) Where the PRA receives an application under paragraph (1), the PRA must approve—

(a)a monetary amount for each ancillary own-fund item; or

(b)a method by which each ancillary own-fund item may be determined for a specified period of time.

(3) Where the PRA grants approval under paragraph (2)—

(a)the undertaking may apply to vary that approval; and

(b)the PRA may vary that approval.

(4) The PRA must base its approval or variation of approval on an assessment of—

(a)the status of the counterparties concerned, in relation to their ability and willingness to pay;

(b)the recoverability of the funds, taking account of the legal form of the ancillary own-fund item and any conditions which would prevent the item from being successfully paid in or called up; and

(c)any information on the outcome of past calls which insurance undertakings, reinsurance undertakings and third-country insurance undertakings have made for ancillary own fund items they have paid in or called up, to the extent that such information can be reliably used to assess the expected outcome of future calls.

Eligible own funds for an intermediate insurance holding companyU.K.

45.—(1) This regulation applies where the PRA is the group supervisor of a group which includes an intermediate insurance holding company or an intermediate mixed financial holding company.

(2) The intermediate insurance holding company or an intermediate mixed financial holding company may apply to the PRA for permission to include eligible own funds in the calculation of group solvency.

(3) Where the PRA receives an application under paragraph (2) , the PRA must approve—

(a)a monetary amount for each ancillary own-fund item; or

(b)a method by which each ancillary own-fund item may be determined for a specified period of time.

(4) Where the PRA grants approval under paragraph (3)—

(a)the undertaking may apply to vary that approval; and

(b)the PRA may vary that approval.

(5) The PRA must base its approval or variation of approval on an assessment of—

(a)the status of the counterparties concerned, in relation to their ability and willingness to pay;

(b)the recoverability of the funds, taking account of the legal form of the ancillary own-fund item and any conditions which would prevent the item from being successfully paid in or called up; and

(c)any information on the outcome of past calls which intermediate insurance holding companies and intermediate mixed financial holding companies have made for each ancillary own-fund item, to the extent that information can be reliably used to assess the expected outcome of future calls.

Classification of fundsU.K.

46.—(1) This regulation applies to an own-fund item which is not included in the list of own-fund items referred to in Article 97(1) of the Solvency 2 Directive.

(2) An insurance undertaking, reinsurance undertaking or third-country insurance undertaking may apply to the PRA for approval of its assessment and classification of an own-fund item referred to in paragraph (1).

(3) The PRA may approve an application made under paragraph (2).

(4) Where the PRA grants approval under paragraph (3)—

(a)the undertaking may apply to vary the approval;

(b)the PRA may vary the approval; or

(c)the PRA may revoke the approval.

(5) The PRA must base its decision to grant, vary or revoke approval on the criteria referred to in Article 94 of the Solvency 2 Directive.

Basic Solvency Capital RequirementU.K.

47.—(1) This regulation applies where an insurance undertaking, reinsurance undertaking or third-country insurance undertaking uses the standard formula to calculate its basic solvency capital requirement.

(2) In order to calculate its life, non-life and health underwriting risk modules, the undertaking may apply to the PRA for approval to use a subset of parameters specific to the undertaking instead of a subset of parameters of the standard formula.

(3) The PRA may only approve an application made under paragraph (2) when—

(a)the parameters the undertaking has applied to use are calibrated on the basis of the internal data of the undertaking concerned, or on the basis of data which are directly relevant to the operations of that undertaking using standardised methods; and

(b)the PRA has verified the completeness, accuracy and appropriateness of the data used.

(4) Where the PRA grants approval under paragraph (3)—

(a)the undertaking may apply to vary the approval;

(b)the PRA may vary the approval provided sub-paragraphs (a) and (b) of paragraph (3) continue to be satisfied; or

(c)the PRA may revoke the approval.

ModelsU.K.

48.—(1) An insurance undertaking, reinsurance undertaking or third-country insurance undertaking may apply to the PRA for approval of—

(a)a full or partial internal model;

(b)major changes to an approved internal model; or

(c)the policy for changing an approved internal model.

(2) The PRA may require an undertaking to run its internal model—

(a)on relevant benchmark portfolios; or

(b)using assumptions based on external rather than internal data,

in order to verify the calibration of the internal model and to check that its specification is in line with generally accepted market practice.

(3) The PRA must approve an application made under paragraph (1) if—

(a)the internal model complies with the requirements of rules implementing Article 112 of the Solvency 2 Directive;

(b)the internal model complies with the requirements of any directly applicable regulations made under Article 127 of the Solvency 2 Directive;

(c)the systems of the undertaking for identifying, measuring, monitoring, managing and reporting risk are adequate; and

(d)in the case of a partial internal model, the model fulfils the requirements of rules implementing Article 113 of the Solvency 2 Directive and any directly applicable regulation made under Article 114 of the Solvency 2 Directive.

(4) The PRA must give a decision on an application made under paragraph (1) within six months of its receipt of the completed application.

(5) Where the PRA grants approval under paragraph (3), the PRA may—

(a)vary the approval;

(b)revoke the approval.

(6) In this regulation “internal model” includes a partial internal model.

Group applicationsU.K.

49.—(1) An insurance undertaking or reinsurance undertaking may make a group application to the PRA where the PRA is the group supervisor for the group to which the undertaking belongs.

[F112(2) The PRA may approve an application made under paragraph (1).]

(3) Where the PRA grants an approval under paragraph (2), the approval may include conditions to which the approval is subject.

(4) The PRA may revoke an approval granted under paragraph (2).

Textual Amendments

Third-country insurance undertakings: approval of supervision in more than one EEA StateU.K.

F11350.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Withdrawal of authorisation for third-country insurance undertakings authorised in more than one EEA StateU.K.

F11451.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Subsidiaries: application of Articles 238 and 239 of the Solvency 2 DirectiveU.K.

F11552.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Transitional measures on risk-free interest ratesU.K.

53.—(1) An insurance undertaking, reinsurance undertaking or third-country insurance undertaking may apply to the PRA for permission to apply a transitional adjustment to a risk-free interest rate term structure with respect to admissible insurance or reinsurance obligations.

(2) Admissible insurance or reinsurance obligations are insurance or reinsurance obligations that meet all of the following requirements—

(a)the contracts that give rise to the insurance or reinsurance obligations are concluded before 1st January 2016;

(b)the technical provisions for the insurance and reinsurance obligations are determined in accordance with rules implementing Article 20 of Directive 2002/83/EC of the European Parliament and of the Council of 5th November 2002 concerning life assurance M5 until 1st January 2016;

(c)the insurance or reinsurance obligations are not subject to a matching adjustment in accordance with an approval granted under regulation 42.

(3) For the purposes of paragraph (2)(a), the renewal of a contract does not give rise to a new contract.

(4) The PRA must approve an application made under paragraph (1) if the condition specified in paragraph (6) would be satisfied if the approval is granted.

(5) Where the PRA grants approval under paragraph (4)—

(a)the undertaking may apply to vary the approval;

(b)the PRA must vary the approval on an application made under sub-paragraph (a) if the condition specified in paragraph (6) would be satisfied in relation to the approval as varied;

(c)the PRA must revoke the approval if the condition specified in paragraph (6) ceases to be satisfied;

(d)the PRA must revoke the approval if the condition specified in paragraph (7) is satisfied.

(6) The condition referred to in paragraphs (4), (5)(b) and (5)(c) is that the transitional adjustment is calculated in accordance with rules implementing Article 308c of the Solvency 2 Directive.

(7) The condition referred to in paragraph (5)(d) is that a progress report submitted to the PRA under rules implementing Article 308e of the Solvency 2 Directive shows that it is unrealistic to expect compliance with the solvency capital requirement by 2032.

Marginal Citations

M5OJ No L345, 19.12.02, p 1.

Transitional measures on technical provisionsU.K.

54.—(1) An insurance undertaking, reinsurance undertaking or third-country insurance undertaking may apply to the PRA for permission to—

(a)apply a transitional deduction to its technical provisions or to such of its technical provisions as are contained within an homogenous risk group; or

(b)recalculate the amount of those technical provisions (and any matching adjustment or volatility adjustment to those technical provisions) at periods of 24 months or less.

(2) The PRA must approve an application made under paragraph (1)(a) if—

(a)conditions 1 and 2 are satisfied; and

(b)condition 3 is satisfied or would be satisfied if the amount of the approved deduction were limited.

(3) The PRA must approve an application made under paragraph (1)(b) if condition 4 is satisfied.

(4) The PRA may also grant the approval referred to in paragraph (1)(b) other than on an application under that paragraph if condition 4 is satisfied.

(5) Where the PRA approves an application under paragraph (2), the PRA may—

(a)make the approval subject to a condition limiting the amount of the approved deduction; or

(b)at any time after granting approval, vary the approval so that—

(i)the approval is subject to a condition limiting the amount of the approved deduction; or

(ii)if the approval is already subject to a condition imposed under sub-paragraph (a) or (b)(i), amend the condition to change the limit.

(6) A limit specified in a condition imposed under paragraph (5) must be no larger than is necessary to ensure that condition 3 is satisfied.

(7) Where the PRA grants approval under paragraph (2), (3) or (4) the undertaking may apply to vary the approval.

(8) Paragraphs (2) to (6) apply to an application to vary an approval under paragraph (7) as they would apply to an application for the approval as varied.

(9) The PRA must revoke an approval granted under paragraph (2) if—

(a)condition 1 or 2 is not satisfied;

F116(b)... or

(c)condition 5 is satisfied.

(10) In this regulation—

(a)“GENPRU 1.2.26R” means the rule known as GENPRU 1.2.26R (requirement to have adequate financial resources) in the PRA's General Prudential Sourcebook as at 31st December 2015, treated as having been made by the PRA on 7th March 2013 under the Financial Services Act 2012 (Transitional Provisions) (Rules and Miscellaneous Provisions) Order 2013 M6;

(b)“INSPRU 7” means the rules and guidance known as INSPRU 7 (individual capital assessment) in the PRA's Prudential Sourcebook for Insurers as at 31st December 2015, made or treated as having been made by the PRA on 7th March 2013 under FSMA and the Financial Services Act 2012 (Transitional Provisions) (Rules and Miscellaneous Provisions) Order 2013; and

(c)conditions specified in the first column of Table 3 have the meaning given in the second column of Table 3.

Table 3
ConditionMeaning
1The transitional deduction satisfies the following condition for all TN—
where—
TN is the amount of the transitional deduction in the year N, so that T0 is the transitional deduction in 2016, T1 is the transitional deduction in 2017, T2 is the transitional deduction in 2018 and continuing until T16 which is the transitional deduction in 2032.
XN is the amount of the technical provisions to which the approval or application for approval relates, calculated for the year N, less the amount recoverable (if any) from reinsurance contracts and special purpose vehicles. The technical provisions for the year N must be calculated in accordance with rules implementing Article 76 of the Solvency 2 Directive, applied as at the last date (“the relevant date”) before the year N at which technical provisions may be recalculated in accordance with an approval granted under paragraph (1)(b) or, if no such approval has been granted, as at 1st January 2016. Where a matching adjustment or volatility adjustment was applied to those technical provisions on 1st January 2016 in accordance with an approval granted under regulation 42 or 43 (as the case may be), the calculation must take into account the matching adjustment or volatility adjustment, recalculated for the relevant date in accordance with an approval granted under paragraph (1)(b) (if any).
YN is the amount of the technical provisions to which the approval or application for approval relates, calculated for the year N, less the amount recoverable (if any) from reinsurance contracts. The technical provisions for the year N must be calculated in accordance with INSPRU 7, applied as at the last date before the year N at which technical provisions may be recalculated in accordance with an approval granted under paragraph (1)(b) or, if no such approval has been granted, as at 31st December 2015.
N represents the years from 2016 to 2032. N takes integer values from 0 to 16, so that 2016 is year 0, 2017 is year 1, 2018 is year 2, and continuing until 2032 which is year 16.
2A transitional deduction is not applied in any year after 2032.
3The transitional deduction does not result in the financial resources which the undertaking is required to maintain in accordance with requirements imposed by or under FSMA in pursuance of the Solvency 2 Directive being less than the financial resources which the undertaking would be required to maintain in accordance with GENPRU 1.2.26R if GENPRU 1.2.26R still applied to the undertaking.
4The risk profile of the undertaking has changed materially.
5A progress report submitted to the PRA under rules implementing Article 308e of the Solvency 2 Directive shows that it is unrealistic to expect compliance with the solvency capital requirement by 2032.

Textual Amendments

Marginal Citations

CHAPTER 3U.K.Procedure: decisions, appeals and notices

Decisions: written noticesU.K.

55.—(1) On determining an application for the grant of an approval, the PRA must give the undertaking a written notice stating—

(a)its decision;

(b)the conditions (if any) to which the approval is subject;

(c)the reasons on which the decision is based; and

(d)if the approval is granted, the date on which the approval takes effect.

(2) Where the PRA varies or revokes an approval, it must give the undertaking concerned a written notice stating—

(a)that the approval is varied or revoked;

(b)the reasons on which the decision to vary or revoke the approval is based;

(c)if the approval is varied, the conditions (if any) to which the approval is subject; and

(d)the date on which the variation or revocation takes effect.

(3) Where the PRA gives a direction under regulation 58(2), it must give the undertaking concerned a written notice stating—

(a)the direction;

(b)the reasons on which the decision to give the direction is based; and

(c)the date on which the direction takes effect.

(4) Where the PRA varies or revokes a direction under regulation 58(3), it must give the undertaking concerned a written notice stating—

(a)that the direction is varied or revoked;

(b)the reasons on which the decision to vary or revoke the direction is based; and

(c)the date on which the variation or revocation takes effect.

(5) The date on which an approval takes effect under paragraph (1)(d) must not be before 1st January 2016.

AppealsU.K.

56.—(1) An undertaking may refer the matter to the Tribunal where it is aggrieved at—

(a)the determination by the PRA of an application for the—

(i)grant of an approval to an undertaking; or

(ii)variation of an approval granted to an undertaking;

(b)in respect of an approval that was granted to that undertaking, the exercise by the PRA of a power to—

(i)vary the approval; or

(ii)revoke the approval.

(2) Part 9 of FSMA (hearings and appeals) applies to a reference to the Tribunal under this regulation as it applies to a reference to the Tribunal under FSMA.

Publication of written noticesU.K.

57.—(1) Subject to paragraph (2), the PRA must publish a relevant notice in the way appearing to the PRA to be best calculated for bringing it to the attention of—

(a)persons likely to be affected by it; and

(b)persons who are, in the opinion of the PRA, likely to make an application for a similar approval.

(2) Paragraph (1) does not apply—

(a)if the relevant notice relates to an application for an approval which has been refused;

(b)if the PRA is satisfied that it is inappropriate or unnecessary to publish the relevant notice; or

(c)to the extent that such publication would be incompatible with an obligation imposed on the PRA by a directly applicable regulation made under the Solvency 2 Directive.

(3) In deciding whether it is satisfied of the matters mentioned in paragraph (2)(b), the PRA must consider whether publication of the relevant notice—

(a)would prejudice, to an unreasonable degree, the commercial interests of the undertaking concerned or any other member of the undertaking's immediate group;

(b)without mentioning the identity of the undertaking concerned might avoid any adverse consequence of publication.

(4) In this regulation, “relevant notice” means a written notice—

(a)given under regulation 55 in relation to a decision or direction of the PRA; or

(b)stating that an event referred to in paragraph (5) has occurred in relation to such a decision.

(5) The events mentioned in paragraph (4)(b) are—

(a)the decision has been referred to the Tribunal;

(b)the decision has been suspended by the Tribunal;

(c)any suspension of the decision has been revoked by the Tribunal;

(d)the reference has been dismissed by the Tribunal.

CHAPTER 4U.K.Rule waivers

Modification or waiver of rulesU.K.

58.—(1) In this regulation, “rule” means a rule made by the PRA under Part 9A of FSMA.

(2) Where the PRA approves an application from an insurance undertaking, reinsurance undertaking or third-country insurance undertaking under regulation 42, 43, 53 or 54, the PRA must direct that any rule to which the undertaking is subject—

(a)is not to apply to that undertaking; or

(b)is to apply to that undertaking with modifications,

to the extent necessary to give effect to that approval.

(3) Where the approval referred to in paragraph (2) is varied or revoked, the PRA must vary or revoke the direction referred to in paragraph (2) to the extent necessary to give effect to the variation or revocation of the approval.

(4) This regulation is without prejudice to the generality of section 138A of FSMA.

PART 5U.K.Amendments

AmendmentsU.K.

59.  Schedule 1, which contains amendments to primary legislation, has effect.

60.  Schedule 2, which contains amendments to secondary legislation, has effect.

David Evennett

John Penrose

Two of the Lords Commissioners of Her Majesty's Treasury

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