The Solvency 2 Regulations 2015

Subsidiaries: solvency capital requirement

21.—(1) This regulation applies where—

(a) a parent undertaking has permission to apply the national laws implementing Articles 238 and 239 of the Solvency 2 Directive to a subsidiary undertaking; and

(b) the PRA is a member of the college of supervisors for that subsidiary undertaking.

(2) Where the PRA is responsible for authorising the subsidiary under Part 4A of FSMA, the PRA may propose to the college of supervisors that any of the following requirements (“a relevant requirement”) be imposed on the subsidiary undertaking—

(a) a capital add-on;

(b) a requirement that the subsidiary calculates its solvency capital requirement on the basis of the standard formula; or

(c) a requirement that the subsidiary replace a subset of the parameters used in the calculation of the standard formula calculation with a subset of parameters specific to the subsidiary when calculating its life, non-life and health underwriting risk modules referred to in Article 104(1) of the Solvency 2 Directive.

(3) The PRA may only impose a requirement referred to in paragraph (2)(b) in exceptional circumstance where a capital add-on would be inappropriate.

(4) The PRA may only impose a requirement referred to in paragraph (2)(c)—

(a) in exceptional circumstances;

(b) where the PRA considers that the subsidiary undertaking’s risk profile deviates significantly from the assumptions underlying the standard formula; and

(c) where the subsidiary undertaking does not properly address the PRA’s concerns.

(5) Where the PRA proposes the imposition of a relevant requirement, the PRA must—

(a) discuss the proposed requirement with the college of supervisors; and

(b) communicate the grounds for the requirement to both the subsidiary and the college of supervisors.

(6) Before imposing a relevant requirement, the PRA must do everything within its power to reach an agreement within the college of supervisors on a proposal for a relevant requirement or on other possible measures.

(7) The PRA may refer a proposal to impose a relevant requirement to EIOPA where—

(a) the PRA—

(i) is the group supervisor; or

(ii) proposed the imposition of the relevant requirement;

(b) the college of supervisors has not reached agreement on the proposal; and

(c) the referral is made within the period of one month starting on the day on which the proposal was communicated to the college (either by the PRA under paragraph (2) or by another supervisory authority).

(8) Where the PRA proposes the imposition of a relevant requirement—

(a) if the college of supervisors has reached agreement on the proposal, the PRA must take its decision in accordance with the agreement;

(b) if the proposal has been referred to EIOPA, the PRA must take its decision in accordance with EIOPA’s decision;

(c) in all other cases, the PRA must decide whether to impose the relevant requirement and provide full reasons for its decision to the subsidiary undertaking and college of supervisors.

(9) The PRA must recognise and apply a decision made by another supervisory authority in accordance with Article 238 of the Solvency 2 Directive to apply a relevant requirement to a subsidiary.