The Solvency 2 Regulations 2015

CHAPTER 3 U.K. Group Solvency

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

[F1 15.— (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

F1 Reg. 15 substituted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(6) (as amended by S.I. 2020/1385, regs. 1(2), 54(2) and S.I. 2019/680, regs. 1(3), 10(4)(f) (with reg. 11))

Choice of method U.K.

16.—(1) Where the PRA is the group supervisor of a group, the PRA must consult the group [F2 and 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 [F3 UK] solvency 2 parent in relation to—

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

F4 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F2 Words in reg. 16(1) substituted (31.12.2020) by S.I. 2019/407, reg. 9(7)(a) (as substituted by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(g) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))

F3 Words in reg. 16(2) substituted (31.12.2020) by S.I. 2019/407, reg. 9(7)(b)(i) (as substituted by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(g) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))

F4 Reg. 16(2)(b) omitted (31.12.2020) by virtue of S.I. 2019/407, reg. 9(7)(b)(ii) (as substituted by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(g) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))

Inclusion of proportional share U.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) [F5 the 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) [F6 the 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 [F7 and, if paragraph (5) applies, the FSC].

[F8 (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

F5 Words in reg. 17(2)(b)(ii) substituted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(8)(a) (as amended by S.I. 2020/1385, regs. 1(2), 54(2)); as amended by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(h)(i) (with reg. 11)

F6 Words in reg. 17(2)(b)(iii) substituted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(8)(a) (as amended by S.I. 2020/1385, regs. 1(2), 54(2)); as amended by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(h)(i) (with reg. 11)

F7 Words in reg. 17(3) omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(8)(b) (as amended by S.I. 2020/1385, regs. 1(2), 54(2)); as amended by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(h)(i) (with reg. 11)

F8 Reg. 17(4)(5) inserted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(8)(c) (as amended by S.I. 2020/1385, regs. 1(2), 54(2) and S.I. 2019/680, regs. 1(3), 10(4)(h)(ii) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)))

Related undertakings: calculation of group solvency U.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 [F9 Gibraltarian 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 [F10 Gibraltar].

(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 [F11 Gibraltar] 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

F9 Words in reg. 18(1)(b) inserted (31.12.2020) by S.I. 2019/407, reg. 9(9)(a)(i) (as substituted by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(i) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))

F10 Words in reg. 18(1)(e) substituted (31.12.2020) by S.I. 2019/407, reg. 9(9)(a)(ii) (as substituted by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(i) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))

F11 Word in reg. 18(2)(a) substituted (31.12.2020) by S.I. 2019/407, reg. 9(9)(b) (as substituted by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(i) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))

Participating undertakings: calculation of group solvency U.K.

19.—(1) This regulation applies where—

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

(b) the group contains an insurance undertaking [F12 , reinsurance undertaking, Gibraltarian insurance undertaking or Gibraltarian reinsurance undertaking] [F13 for 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 [F14 the 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.

[F15 (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).]

[F16 (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—

F17 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) take the decision in accordance with the criteria set out in [F18 Article 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 [F19 the United Kingdom law which implemented] Chapter 6 of Title 1 to the Solvency 2 Directive or to the solvency regime of the third country.

[F20 (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

F12 Word in reg. 19(1)(b) substituted (31.12.2020) by S.I. 2019/407, reg. 9(10)(a)(i) (as substituted by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(j)(i) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))

F13 Word in reg. 19(1)(b) substituted (31.12.2020) by S.I. 2019/407, reg. 9(10)(a)(ii) (as substituted by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(j)(i) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))

F14 Words in reg. 19(1)(c) inserted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(10)(b) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))

F15 Reg. 19(2A) inserted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(10)(c) (as amended by S.I. 2020/1385, regs. 1(2), 54(2) and S.I. 2020/1301, regs. 1, 3, Sch. para. 27(c)(i))

F16 Reg. 19(3) substituted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(10)(d) (as amended by S.I. 2020/1385, regs. 1(2), 54(2); S.I. 2020/1301, regs. 1, 3, Sch. para. 27(c)(ii) and S.I. 2019/680, regs. 1(3), 10(4)(j)(ii) (with reg. 11))

F17 Reg. 19(4)(a) omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(10)(e)(i) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))

F18 Words in reg. 19(4)(b) substituted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(10)(e)(ii) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))

F19 Words in reg. 19(4)(c) inserted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(10)(e)(iii) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))

F20 Reg. 19(5) inserted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(10)(f) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))

[F21 Gibraltar undertakings: calculation of group solvency U.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

F21 Reg. 19A inserted by S.I. 2019/407, reg. 9(10A) (as inserted) by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(k) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))

Internal models and capital add-ons U.K.

20.—(1) Where group solvency is determined in accordance with method 1, the PRA must pay particular attention to F22 ... 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 [F23 PRA or, where there is a Gibraltarian insurance undertaking or a Gibraltarian reinsurance undertaking, the FSC] F24 ....

(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 F25 ... 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 F26 ....

(5) [F27 Where 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

F22 Words in reg. 20(1) omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(11)(a)(i) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))

F23 Words in reg. 20(1)(b) substituted (31.12.2020) by S.I. 2019/407, reg. 9(11)(a)(ii)(aa) (as substituted by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(l)(i) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))

F24 Words in reg. 20(1)(b) omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(11)(a)(ii)(bb) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))

F25 Words in reg. 20(3) omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(11)(b) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))

F26 Words in reg. 20(4) omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(11)(c) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))

F27 Words in reg. 20(5) substituted (31.12.2020) by S.I. 2019/407, reg. 9(11)(d) (as substituted by The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019/680), regs. 1(3), 10(4)(l)(ii) (with reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 40(f)); 2020 c. 1, Sch. 5 para. 1(1))

Subsidiaries: solvency capital requirement U.K.

F28 21.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F28 Reg. 21 omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(12) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))

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

F29 22.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F29 Reg. 22 omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(12) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))

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

F30 23.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F30 Reg. 23 omitted (31.12.2020) by virtue of The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 9(12) (as amended by S.I. 2020/1385, regs. 1(2), 54(2))