The Solvency 2 Regulations 2015

Statutory Instruments

2015 No. 575

Financial Services And Markets

The Solvency 2 Regulations 2015

Made

6th March 2015

Laid before Parliament

9th March 2015

Coming into force in accordance with regulation 1

The Treasury are a government department designated M1 for the purposes of section 2(2) of the European Communities Act 1972 M2 in relation to financial services.

The Treasury, in exercise of the powers conferred upon them by section 2(2) of the European Communities Act 1972, make the following Regulations:

Marginal Citations

M1 S.I. 2012/1759.

M2 1972 c.68; section 2(2) was amended by section 27 of the Legislative and Regulatory Reform Act 2006 (c. 51) and by section 3 of, and the Schedule to, the European Union (Amendment) Act 2008 (c. 7). By virtue of the amendment of section 1(2) made by section 1 of the European Economic Act 1993 (c. 51) regulations may be made under section 2(2) to implement obligations of the United Kingdom created by or arising under the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 (Cm 2073, OJ No L1, 3.11.1994, p.3) and the Protocol adjusting that Agreement signed at Brussels on 17th March 1993 (Cm 2183, OJ No L1, 3.1.1994, p.572).

PART 1 U.K. Citation, commencement and interpretation

Citation and commencement U.K.

Interpretation U.K.

Marginal Citations

M3 OJ no L331, 15.12.2010, p. 48.

M4 OJ no L035, 11.02.2003, p.1.

M5 2000 c.8.

M6 OJ no L335, 17.12.2009, p.1, as amended by Directive 2011/89/EU (OJ no L326, 8.12.2011, p. 113), Directive 2012/23/EU (OJ no L249, 14.9.2013, p. 1), Directive 2013/23/EU (OJ no L158, 10.6.2013, p. 362), Directive 2013/58/EU (OJ no L341, 18.12.2013, p. 1) and Directive 2014/51/EU (OJ no L153, 22.5.2014, p. 1).

M7 “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.

M8 “Branch”, “parent undertaking”, “reinsurance” and “supervisory authority” are defined in Article 13.

PART 2 U.K. Supervision

Exercise of PRA and FCA functions U.K.

Review of capital add-ons U.K.

Passporting: notification of home state regulator U.K.

EIOPA: information U.K.

EIOPA and EBA: notifications U.K.

Other EEA States: information U.K.

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

PART 3 U.K. Groups

CHAPTER 1 U.K. Cases of application and scope

Risk concentration and intra-group transactions U.K.

Equivalent provisions U.K.

Exclusion of undertaking from group supervision U.K.

CHAPTER 2 U.K. Levels

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

Supervision of parents and subgroups at national level: procedure U.K.

CHAPTER 3 U.K. Group Solvency

Supervision of group solvency and frequency of calculation U.K.

Choice of method U.K.

Inclusion of proportional share U.K.

Related undertakings: calculation of group solvency U.K.

Participating undertakings: calculation of group solvency U.K.

Internal models and capital add-ons U.K.

Subsidiaries: solvency capital requirement U.K.

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

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

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

Supervision of risk concentration and intra-group transactions U.K.

CHAPTER 5 U.K. Risk management and internal control

Supervision of system of governance U.K.

CHAPTER 6 U.K. Measures to facilitate group supervision

Rule for deciding the group supervisor U.K.

Exceptions to the rule for deciding the group supervisor U.K.

Duties of group supervisor and establishment of college of supervisors U.K.

Cooperation and exchange of information between supervisory authorities U.K.

Consultation between supervisory authorities U.K.

Access to information U.K.

Verification of information U.K.

Group solvency and financial condition report U.K.

Enforcement measures U.K.

CHAPTER 7 U.K. Third countries

Non-EEA solvency 2 parent undertakings: equivalence U.K.

Parent undertaking outside the EEA: absence of equivalence U.K.

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

Intra-group transactions U.K.

PART 4 U.K. Approvals

CHAPTER 1 U.K. Procedure: applications

Meaning of “approval”, “group application”, “protected item” and “branch” U.K.

Marginal Citations

M9 See Article 231 of the Solvency 2 Directive.

M10 See Article 233(5) of the Solvency 2 Directive.

Applications: eligibility, process, information and documents U.K.

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

Marginal Citations

M11 Referred to in Articles 236(e) and 237 of the Solvency 2 Directive.

CHAPTER 2 U.K. Specific Approvals

Verification that the Solvency 2 Directive does not apply U.K.

Matching adjustment U.K.

Volatility adjustment U.K.

Supervisory approval of ancillary own-funds U.K.

Eligible own funds for an intermediate insurance holding company U.K.

Classification of funds U.K.

Basic Solvency Capital Requirement U.K.

Models U.K.

Group applications U.K.

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

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

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

Transitional measures on risk-free interest rates U.K.

Marginal Citations

M12 OJ No L345, 19.12.02, p 1.

Transitional measures on technical provisions U.K.

Marginal Citations

M13 S.I. 2013/161.

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

Decisions: written notices U.K.

Appeals U.K.

Publication of written notices U.K.

CHAPTER 4 U.K. Rule waivers

Modification or waiver of rules U.K.

PART 5 U.K. Amendments

Amendments U.K.

David Evennett

John Penrose

Two of the Lords Commissioners of Her Majesty's Treasury

6th March 2015

Regulation 59

SCHEDULE 1 U.K. Amendments to primary legislation

PART 1 U.K. Amendments to FSMA

1.  FSMA is amended as follows. U.K.

2.—(1) Section 55J (variation or cancellation on initiative of regulator) is amended as follows. U.K.

(2) After subsection (7), insert—

“(7A) Without prejudice to the generality of subsections (1) and (3), if it appears to the PRA that there has been a serious failure by a PRA-authorised person who is an insurance undertaking or reinsurance undertaking to comply with requirements imposed by or under this Act in pursuance of the Solvency 2 Directive, the PRA may exercise its powers under this section to cancel the undertaking's Part 4A permission.

(7B) If it appears to the PRA that the conditions in section 55KA are met in relation to a PRA-authorised person who is an insurance undertaking, reinsurance undertaking or third-country insurance undertaking, the PRA must—

(a) in relation to the undertaking's Part 4A permission so far as the permission relates to the regulated activity of effecting contracts of insurance as principal (“activity A”), exercise the PRA's powers under this section by varying the permission—

(i) where the permission relates to activity A in relation to both contracts of long-term insurance and contracts of general insurance and the conditions in section 55KA are met only in relation to the business of the undertaking so far as relating to contracts of one of those kinds, so as to remove activity A so far as relating to contracts of that kind from the regulated activities to which the permission relates, and

(ii) in any other case, so as to remove activity A from the regulated activities to which the permission relates;

(b) in relation to the undertaking's Part 4A permission so far as the permission relates to the regulated activity of carrying out contracts of insurance as principal (“activity B”), exercise the PRA's powers under this section, if it appears to the PRA to be necessary to do so to protect the interests of the undertaking's policyholders, by varying the Part 4A permission—

(i) where the permission relates to activity B in relation to both contracts of long-term insurance and contracts of general insurance and the conditions in section 55KA are met only in relation to the business of the undertaking so far as relating to contracts of one of the those kinds, so as to remove activity B so far as relating to contracts of that kind from the regulated activities to which the permission relates, and

(ii) in any other case, so as to remove activity B from the regulated activities to which the permission relates.

(7C) If the effect of a variation required by subsection (7B) is to remove all the regulated activities to which the Part 4A permission relates, the PRA must instead cancel the permission.”.

3.  After section 55K (investment firms: particular conditions that enable cancellation), insert— U.K.

“55KA.    Insurance undertakings, reinsurance undertakings and third-country insurance undertakings: particular conditions that enable cancellation

4.  After section 55P (prohibitions and restrictions), insert— U.K.

“55PA.    Assets requirements imposed on insurance undertakings or reinsurance undertakings

5.  In section 105 (insurance business transfer schemes), in subsection (3), in paragraph (aa) of Case 2 M14 , omit “(within the meaning of Article 2.1(c) of the reinsurance directive)”. U.K.

6.—(1) Section 116 (effect of insurance business transfers authorised in other EEA States) is amended as follows. U.K.

(2) In subsection (2) M15 —

(a) for paragraphs (a) and (b) substitute—

“(a) an undertaking authorised in an EEA State other than the United Kingdom under Article 162 of the Solvency 2 Directive;

(b) an undertaking whose head office is not in an EEA State and which is authorised under the law of an EEA State other than the United Kingdom to carry out reinsurance activities in its territory (as mentioned in Article 174 of the Solvency 2 Directive).”; and

(b) omit paragraph (c).

(3) For subsections (5) M16 and (6) M17 substitute—

“(5) “Authorised transfer” means—

(a) in subsection (1), a transfer authorised by the supervisory authorities of the home State of the EEA firm in accordance with Article 39 of the Solvency 2 Directive;

(b) in subsection (2), a transfer authorised in an EEA State other than the United Kingdom in accordance with—

(i) Article 164 of the Solvency 2 Directive; or

(ii) the provisions in the law of that EEA State which provide for the authorisation of transfers of all or part of a portfolio of contracts of an undertaking authorised to carry out reinsurance activities in its territory (as mentioned in Article 174 of the Solvency 2 Directive).

(6) “UK policy”, in relation to an authorised transfer, means a policy evidencing a contract of insurance or reinsurance to which the applicable law is the law of a part of the United Kingdom.”.

(4) After subsection (7) insert—

“(7A) In this section the “home State” is the EEA State which is the “home Member State” for the purposes of the Solvency 2 Directive (which is to be determined in accordance with Article 13(8) of that directive).”.

7.  In section 165(7) (regulators' power to require information: authorised persons etc), after paragraph (d), insert— U.K.

“(e) by either regulator, to impose requirements on a person who provides any service to an insurance undertaking, reinsurance undertaking or third-country insurance undertaking.”.

8.—(1) Section 167 (appointment of persons to carry out general investigations) is amended as follows. U.K.

(2) In subsection (2)—

(a) at the end of paragraph (a) omit “or”;

(b) at the end of paragraph (b) insert “ ; or; ” and

(c) after paragraph (b) insert—

“(c) where A is an insurance undertaking, reinsurance undertaking or third-country insurance undertaking, a person who provides services to A.”.

(3) After subsection (3), insert—

“(3A) If a person appointed under subsection (1) decides under subsection (2)(c) to investigate a person located in an EEA State other than the United Kingdom the person appointed must inform the supervisory authority of that EEA State prior to conducting an on-site inspection.”.

9.  In section 190(4) (requests for further information), for paragraph (b) M18 substitute— U.K.

“(b) is not subject to supervision under—

(i) the UCITS directive;

(ii) the Solvency 2 Directive;

(iii) the markets in financial instruments directive; or

(iv) the capital requirements directive.”.

10.  In section 194 (general grounds on which power of intervention is exercisable), after subsection (1A) M19 , insert— U.K.

“(1AA) Where an incoming firm is an EEA firm falling within paragraph 5(d) or (da) of Schedule 3, the appropriate regulator must not exercise its power of intervention under subsection (1)(c) in respect of that firm if doing so would, for the purposes of the Solvency 2 Directive, constitute financial supervision of that firm.”.

11.—(1) Section 198 (power to apply to court for injunction in respect of certain overseas insurance companies) is amended as follows. U.K.

(2) For subsection (1) substitute—

“(1) This section applies if the appropriate regulator has received a request made in respect of an incoming EEA firm in accordance with Article 140 of the Solvency 2 Directive.”.

(3) In subsection (3A), for “competent authority for the purposes of the provision referred to in subsection (1)(a), (b) or (c)” substitute “ supervisory authority for the purposes of Article 140 of the Solvency 2 Directive ”.

12.  In section 316 (direction by a regulator), in subsection (4)(b)(i), for “any of the insurance directives” substitute “ the Solvency 2 Directive ”. U.K.

13.  In section 367(3) (winding up petitions), before paragraph (a), insert— U.K.

“(za) in the case of an insurance undertaking or reinsurance undertaking, the PRA has cancelled the body's Part 4A permission pursuant to section 55J(7C);”.

14.  In section 405(5) (directions), omit paragraphs (c) and (d). U.K.

15.  In section 417 (definitions), in subsection (1), insert at the appropriate place in each case— U.K.

““insurance undertaking” has the meaning given in Article 13(1) of the Solvency 2 Directive;”

““minimum capital requirement” means—

(a)

in relation to an insurance undertaking or reinsurance undertaking, requirements imposed by or under this Act in pursuance of Section 5 of Chapter 6 of Title 1 of the Solvency 2 Directive;

(b)

in relation to a third-country insurance undertaking, requirements imposed by or under this Act in pursuance of those provisions and Article 166 of the Solvency 2 Directive.”

““reinsurance undertaking” has the meaning given in Article 13(4) of the Solvency 2 Directive;”

““solvency capital requirement” means—

(a)

in relation to an insurance undertaking or reinsurance undertaking, requirements imposed by or under this Act in pursuance of Section 4 of Chapter 6 of Title 1 of the Solvency 2 Directive;

(b)

in relation to a third-country insurance undertaking, requirements imposed by or under this Act in pursuance of those provisions and Article 166 of the Solvency 2 Directive.”

““third-country insurance undertaking” means an undertaking that has received authorisation under Article 162 of the Solvency 2 Directive from the PRA or the FCA;”.

16.  In section 425(1)(a) (expressions relating to authorisation elsewhere in the single market)— U.K.

(a) omit “ “life assurance consolidation directive””, “ “first non-life insurance directive””, “insurance directives” and “reinsurance directive”, and

(b) after “ “single market directives”” insert “ “, Solvency 2 Directive” ”.

17.—(1) Schedule 3 (EEA passport rights) is amended as follows. U.K.

(2) In paragraph 1—

(a) for paragraph (c) substitute—

“(c) the Solvency 2 Directive;”;

(b) omit paragraph (ca).

(3) For paragraph 3 substitute—

“The Solvency 2 Directive

3.   “The 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).”.

(4) Omit paragraph 3A.

(5) In paragraph 5, for paragraphs (d) and (da) substitute—

“(d) an undertaking pursuing the activity of direct insurance (within the meaning of Article 2 of the Solvency 2 Directive) which has received authorisation under Article 14 of that directive from its home state regulator;

(da) an undertaking pursuing the activity of reinsurance (within the meaning of Article 2 of the Solvency 2 Directive) as a reinsurance undertaking which has received authorisation under Article 14 of that directive from its home state regulator;”.

(6) In paragraph 15, for sub-paragraph (6) substitute—

“(6) The permission is to be treated as being on terms equivalent to those appearing in the authorisation granted to the firm under Article 14 of the Solvency 2 Directive by its home state regulator (“its home authorisation”).”.

(7) In paragraph 19—

(a) in sub-paragraphs (5)(b)(i), (7) and (9), for “any of the insurance directives” substitute “ the Solvency 2 Directive ”;

(b) in sub-paragraph (5ZA), for “a UK firm having an EEA right which is subject to the conditions of the reinsurance directive” substitute “ a UK firm which falls within the second sub-paragraph of Article 2(1) of the Solvency 2 Directive ”;

(c) in sub-paragraph (7)(b) for “those directives” substitute “ that directive ”.

(8) In paragraph 20—

(a) in sub-paragraph (1) for “(4F)”, substitute “ (4I) ”;

(b) in sub-paragraphs (3A) and (4B) for “any of the insurance directives” substitute “ the Solvency 2 Directive ”;

(c) in sub-paragraph (4D), for “a UK firm having an EEA right which is subject to the conditions of the reinsurance directive” substitute “ a UK firm which falls within the second sub-paragraph of Article 2(1) of the Solvency 2 Directive ”;

(d) after sub-paragraph (4F) insert—

“(4G) This paragraph does not apply to a UK firm exercising an EEA right to enter into a Community co-insurance contract if it is not the leading insurance undertaking.

(4H) In this paragraph “Community co-insurance contract” means a contract of insurance which—

(a) covers one or more risks that are within any of classes 3 to 16 of Annex I of the Solvency 2 Directive;

(b) covers a large risk situated within the EEA which is not covered in whole or in part by another contract of insurance;

(c) provides that the risk to which it relates is covered by an overall premium and for the same period by two or more insurance undertakings each for its own part as a co-insurer, at least one of which enters into the contract from a head office or branch established in an EEA State other than that of the leading insurance undertaking; and

(d) provides that one of the co-insurers is the leading insurance undertaking.

(4I) In this paragraph—

(a) “leading insurance undertaking” means the insurance undertaking which under the Community co-insurance contract is specified as such and assumes fully the leader's role including in particular—

(i) being treated as covering the whole risk; and

(ii) determining the terms and conditions of insurance and rating;

(b) “large risk” has the meaning given in Article 13(27) of the Solvency 2 Directive but as if the risks referred to in point (c) of the first sub-paragraph of Article 13(27) included risks insured by professional associations, joint ventures, or temporary groupings.”.

18.—(1) Schedule 12 (transfer schemes: certificates) is amended as follows. U.K.

(2) In paragraph 1—

(a) after sub-paragraph (1)(b) insert—

“(ba) if sub-paragraph (2A) applies, a certificate under paragraph 3A.”;

(b) in sub-paragraph (2) for “Article 4 of the life assurance consolidation directive or Article 6 of the first non-life insurance directive” substitute “ Article 14 of the Solvency 2 Directive ”;

(c) after sub-paragraph (2) insert—

“(2A) This sub-paragraph applies if—

(a) the transferor concerned is a UK authorised person which has received authorisation under Article 14 of the Solvency 2 Directive from the appropriate regulator; and

(b) as regards any policy which is included in the proposed transfer and which evidences a contract of insurance (other than reinsurance), the contract was concluded in an EEA State other than the United Kingdom.”;

(d) in sub-paragraph (3)(a) for “Article 4 or Article 51 of the life assurance consolidation directive” substitute “ Article 162 of the Solvency 2 Directive ”;

(e) in sub-paragraph (4)(a) for “Article 6 or Article 23 of the first non-life insurance directive” substitute “ Article 162 of the Solvency 2 Directive ”;

(f) in sub-paragraph (5), for paragraphs (a) and (b) substitute—

“(a) the transferor concerned has received authorisation under Article 162 of the Solvency 2 Directive from the appropriate regulator; and

(b) the proposed transfer is to a branch or agency, in an EEA State other than the United Kingdom, authorised under that Article.”.

(3) In paragraph 2—

(a) for sub-paragraph (6)(aa) substitute—

“(aa) if the transferee is a non-EEA branch, the supervisory authority of the EEA State in which the transferee is situated or, where appropriate, the supervisory authority of an EEA State which supervises the state of solvency of the entire business of the transferee's agencies and branches within the EEA in accordance with Article 167 of the Solvency 2 Directive;”;

(b) for sub-paragraph (7A), substitute—

“(7A) “Supervisory authority” has the same meaning as in the Solvency 2 Directive.”;

(c) for sub-paragraph (9), substitute—

“(9) “Non-EEA branch” means a branch or agency which has received authorisation under Article 162 of the Solvency 2 Directive.”.

(4) In the heading to paragraph 3, for “consent” substitute “ consultation ”.

(5) After paragraph 3 insert—

“Certificates as to consent U.K.

3A.   A certificate under this paragraph is one given by the appropriate regulator and certifying that in respect of each contract concluded in an EEA State other than the United Kingdom the authority responsible for supervising persons who effect or carry out contracts of insurance in the EEA State in which that contract was concluded has been notified of the proposed scheme and that—

(a) the authority has consented to the proposed scheme; or

(b) the authority has not responded but the period of three months beginning with the notification has elapsed.”.

(6) For paragraph 5A(4) substitute—

“(4) “Relevant authority” means the supervisory authority (within the meaning of the Solvency 2 Directive) of the EEA State in which the transferee is set up.”.

(7) In paragraph 10—

(a) for sub-paragraph (3) substitute—

“(3) The transferor is a company authorised in an EEA State other than the United Kingdom under Article 162 of the Solvency 2 Directive and the transferee is a UK authorised person which has received authorisation under Article 14 of the Solvency 2 Directive.”;

(b) for sub-paragraph (4) substitute—

“(4) The transferor is a Swiss general insurer and the transferee is a UK authorised person which has received authorisation under Article 14 of the Solvency 2 Directive.”.

PART 2 U.K. Amendments to other primary legislation

Friendly Societies Act 1992 U.K.

Finance Act 1997 U.K.

Terrorism Act 2000 U.K.

Capital Allowances Act 2001 U.K.

Proceeds of Crime Act 2002 U.K.

Finance Act 2003 U.K.

Companies Act 2006 U.K.

Corporation Tax Act 2009 U.K.

Regulation 60

SCHEDULE 2 U.K. Amendments to secondary legislation

Insolvency (Scotland) Rules 1986 U.K.

Companies (1986 Order) (Insurance Companies Accounts) Regulations (Northern Ireland) 1994 U.K.

Mineworkers' Pension Scheme (Modification) Regulations 1994 U.K.

Industry-Wide Mineworkers' Pension Scheme Regulations 1994 U.K.

Insurance Companies (Overseas Life Assurance Business) (Compliance) Regulations 1995 U.K.

Occupational Pension Schemes (Scheme Administration) Regulations 1996 U.K.

Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997 U.K.

Individual Savings Account Regulations 1998 U.K.

Competition Act 1998 (Small Agreements and Conduct of Minor Significance) Regulations 2000 U.K.

Competition Act 1998 (Determination of Turnover for Penalties) Order 2000 U.K.

Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 U.K.

The Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001 U.K.

Financial Services and Markets Act 2000 (EEA Passport Rights) Regulations 2001 U.K.

Financial Services and Markets Act 2000 (Law Applicable to Contracts of Insurance) Regulations 2001 U.K.

The Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations 2001 (Article 39) U.K.

Enterprise Act 2002 (Merger Fees and Determination of Turnover) Order 2003 U.K.

Insurers (Reorganisation and Winding Up) Regulations 2004 U.K.

Child Trust Funds Regulations 2004 U.K.

Financial Conglomerates and Other Financial Groups Regulations 2004 U.K.

Pension Protection Fund (Entry Rules) Regulations (Northern Ireland) 2005 U.K.

Occupational Pension Schemes (Investment) Regulations (Northern Ireland) 2005 U.K.

Pension Protection Fund (Entry Rules) Regulations 2005 U.K.

Insurers (Reorganisation and Winding Up) (Lloyd's) Regulations 2005 U.K.

Occupational Pension Schemes (Investment) Regulations 2005 U.K.

Money Laundering Regulations 2007 U.K.

Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 U.K.

Insurance Accounts Directive (Miscellaneous Insurance Undertakings) Regulations 2008 U.K.

Payment Services Regulations 2009 U.K.

Mutual Societies (Transfers) Order 2009 U.K.

Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 U.K.

Financial Services and Markets Act 2000 (Law Applicable to Contracts of Insurance) Regulations 2009 U.K.

Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations (Northern Ireland) 2010 U.K.

Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010 U.K.

Electronic Money Regulations 2011 U.K.

Bank of England Act 1998 (Macro-prudential Measures) Order 2013 U.K.

Enterprise Act 2002 (Mergers) (Interim Measures: Financial Penalties) (Determination of Control and Turnover) Order 2014 U.K.

Regulation 35

SCHEDULE 3 U.K. Parent undertakings outside the EEA: equivalence

1.  This Schedule specifies the procedure for verifying whether the insurance undertaking or reinsurance undertaking referred to in regulation 35(1) is subject to supervision which is equivalent to that set out in Title 3 of the Solvency 2 Directive. U.K.

2.  The PRA must follow the procedure set out in Flowchart 1 in order to determine whether— U.K.

(a) Article 19 of the EIOPA Regulation applies;

(b) the PRA must make the decision on equivalence;

(c) another supervisory authority will make the decision on equivalence; or

(d) the PRA must rely on equivalent group supervision exercised by the third country supervisory authorities.

3.  Flowchart 1 also imposes duties and confers powers on the PRA for the purposes of making and giving effect to that determination. U.K.

4.  Where reference is made to this paragraph in Flowchart 1, the PRA must— U.K.

(a) verify equivalence—

(i) at the level of the ultimate non-EEA solvency 2 parent where—

(aa) the Commission has adopted a delegated act under Article 260(3) of the Solvency 2 Directive; and

(bb) the parent undertaking is a subsidiary of an insurance holding company or a mixed financial holding company which has its head office in a third country, or of a third country insurance undertaking or third country reinsurance undertaking; or

(ii) in all other cases, either at the level of the ultimate non-EEA solvency 2 parent or at a lower level;

(b) where sub-paragraph (a)(ii) applies, explain its decision to the group to which the insurance undertaking or reinsurance undertaking belongs;

(c) consult the other supervisory authorities making up the college before making a decision on equivalence;

(d) 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 in Title 3 of the Solvency 2 Directive or the third country; and

(e) take its decision on equivalence in accordance with the criteria set out in any delegated act made by the European Commission under Article 260(2) of the Solvency 2 Directive.

5.  In this schedule, “ acting group supervisor” means the supervisory authority acting as the group supervisor for the purposes of determining whether the insurance undertaking or reinsurance undertaking is subject to supervision which is equivalent to that set out in Title 3 of the Solvency 2 Directive. U.K.

Regulation 40

SCHEDULE 4 U.K. Procedure for an application for a subsidiary to be subject to national law implementing Articles 238 and 239 of the Solvency 2 Directive

1.  When the PRA receives an application referred to in the first row of Table 2, the PRA must follow the procedure set out in Flowchart 2 for the purposes of determining whether— U.K.

(a) the PRA must recognise and apply the group supervisor's decision on the application;

(b) the PRA must take its decision on the application in conformity with a decision made by EIOPA;

(c) the PRA must recognise and apply an agreement reached by the college of supervisors; or

(d) the PRA (as group supervisor) must take the decision on the application.

2.  Flowchart 2 also imposes duties and confers powers on the PRA for the purposes of making and giving effect to that determination. U.K.

3.  In Flowchart 2— U.K.

(a) “college” means the college of supervisory authorities;

(b) “relevant date” means the date falling immediately after the period of three months beginning with the date on which the complete application was received by the supervisory authority to which the application was made; and

(c) a reference to the panel's proposal being rejected is a reference to a proposal by EIOPA's panel being rejected in accordance with Articles 41(2) and (3), and 44(1), of the EIOPA Regulation.

Regulation 40

SCHEDULE 5 U.K. Procedure for group applications

1.  When the PRA receives a group application, the PRA must follow the procedure set out in Flowchart 3 for the purposes of determining whether— U.K.

(a) the PRA must recognise and apply the group supervisor's decision on the application;

(b) the PRA must take its decision on the application in conformity with a decision made by EIOPA;

(c) the PRA must recognise and apply an agreement reached by the college of supervisors; or

(d) the PRA (as group supervisor) must take the decision on the application.

2.  Flowchart 3 also imposes duties and confers powers on the PRA for the purposes of making and giving effect to that determination. U.K.

3.  In Flowchart 3— U.K.

(a) “college” means the college of supervisory authorities;

(b) “relevant date” means the date falling immediately after the period of six months beginning with the date on which the complete application was received by the supervisory authority to which the application was made; and

(c) a reference to the panel's proposal being rejected is a reference to a proposal by EIOPA's panel being rejected in accordance with Articles 41(2) and (3), and 44(1), of the EIOPA Regulation.

Explanatory Note