Commission Delegated Regulation (EU) 2015/35Dangos y teitl llawn

CHAPTER I GENERAL PROVISIONS

SECTION 1 Definitions and general principles

Article 1 Definitions

For the purposes of this Regulation, the following definitions shall apply:

1.

alternative valuation methods' means valuation methods that are consistent with Article 75 of Directive 2009/138/EC, other than those which solely use the quoted market prices for the same or similar assets or liabilities;

2.

‘scenario analysis’ means the analysis of the impact of a combination of adverse events;

3.

‘health insurance obligation’ means an insurance obligation that covers one or both of the following:

(i)

the provision of medical treatment or care including preventive or curative medical treatment or care due to illness, accident, disability or infirmity, or financial compensation for such treatment or care,

(ii)

financial compensation arising from illness, accident, disability or infirmity;

4.

‘medical expense insurance obligation’ means an insurance obligation that covers the provision or financial compensation referred to in point (3)(i);

5.

‘income protection insurance obligation’ means an insurance obligation that covers the financial compensation referred to in point (3)(ii) other than the financial compensation referred to in point (3)(i);

6.

‘workers compensation insurance obligation’ means an insurance obligation that covers the provision or financial compensation referred to in points (3)(i) and (ii) and which arises only from to accidents at work, industrial injury and occupational disease;

7.

‘health reinsurance obligation’ means a reinsurance obligation which arises from accepted reinsurance covering health insurance obligations;

8.

‘medical expense reinsurance obligation’ means a reinsurance obligation which arises from accepted reinsurance covering medical expense insurance obligations;

9.

‘income protection reinsurance obligation’ means a reinsurance obligation which arises from accepted reinsurance covering income protection insurance obligations;

10.

‘workers' compensation reinsurance obligation’ means a reinsurance obligation which arises from accepted reinsurance covering workers' compensation insurance obligations;

11.

‘written premiums’ means the premiums due to an insurance or reinsurance undertaking during a specified time period regardless of whether such premiums relate in whole or in part to insurance or reinsurance cover provided in a different time period;

12.

‘earned premiums’ means the premiums relating to the risk covered by the insurance or reinsurance undertaking during a specified time period;

13.

‘surrender’ means all possible ways to fully or partly terminate a policy, including the following:

(i)

voluntary termination of the policy with or without the payment of a surrender value;

(ii)

change of insurance or reinsurance undertaking by the policy holder;

(iii)

termination of the policy resulting from the policy holder's refusal to pay the premium;

14.

‘discontinuance’ of an insurance policy means surrender, lapse without value, making a contract paid-up, automatic non-forfeiture provisions or exercising other discontinuity options or not exercising continuity options;

15.

‘discontinuity options’ mean all legal or contractual policyholder rights which allow that policyholder to fully or partly terminate, surrender, decrease, restrict or suspend insurance cover or permit the insurance policy to lapse;

16.

‘continuity options’ mean all legal or contractual policyholder rights which allow that policyholder to fully or partly establish, renew, increase, extend or resume insurance or reinsurance cover;

17.

‘coverage of an internal model’ means the risks that are reflected in the probability distribution forecast underlying the internal model;

18.

‘scope of an internal model’ means the risks that the internal model is approved to cover; the scope of an internal model may include both risks which are and which are not reflected in the standard formula for the Solvency Capital Requirement;

19.

‘investment in a tradable security or another financial instrument based on repackaged loans’ and ‘securitisation position’ means an exposure to a securitisation within the meaning of Article 4(1)(61) of Regulation (EU) No 575/2013 of the European Parliament and of the Council(1);

20.

‘resecuritisation position’ means an exposure to a resecuritisation within the meaning of Article 4(1)(63) of Regulation (EU) No 575/2013;

21.

‘originator’ means an originator within the meaning of Article 4(1)(13) of Regulation (EU) No 575/2013;

22.

‘sponsor’ means sponsor within the meaning of Article 4(1)(14) of Regulation (EU) No 575/2013;

23.

‘tranche’ means tranche within the meaning of Article 4(1)(67) of Regulation (EU) No 575/2013;

24.

‘central bank’ means central bank within the meaning ofArticle 4(1)(46) of Regulation (EU) No 575/2013.

25.

‘basis risk’ means the risk resulting from the situation in which the exposure covered by the risk-mitigation technique does not correspond to the risk exposure of the insurance or reinsurance undertaking;

26.

‘collateral arrangements’ means arrangements under which collateral providers do one of the following:

(a)

transfer full ownership of the collateral to the collateral taker for the purposes of securing or otherwise covering the performance of a relevant obligation;

(b)

provide collateral by way of security in favour of, or to, a collateral taker, and the legal ownership of the collateral remains with the collateral provider or a custodian when the security right is established;

27.

in relation to a set of items, ‘all possible combinations of two’ such items means all ordered pairs of items from that set;

28.

‘pooling arrangement’ means an arrangement whereby several insurance or reinsurance undertakings agree to share identified insurance risks in defined proportions. The parties insured by the members of the pooling arrangement are not themselves members of the pooling arrangement.

29.

‘pool exposure of type A’ means the risk ceded by an insurance or reinsurance undertaking to a pooling arrangement where the insurance or reinsurance undertaking is not a party to that pooling arrangement.

30.

‘pool exposure of type B’ means the risk ceded by an insurance or reinsurance undertaking to another member of a pooling arrangement, where the insurance or reinsurance undertaking is a party to that pooling arrangement;

31.

‘pool exposure of type C’ means the risk ceded by an insurance or reinsurance undertaking which is a party to a pooling arrangement to another insurance or reinsurance undertaking which is not a member of that pooling arrangement.

32.

‘deep market’ means a market where transactions involving a large quantity of financial instruments can take place without significantly affecting the price of the instruments.

33.

‘liquid market’ means a market where financial instruments can readily be converted through an act of buying or selling without causing a significant movement in the price.

34.

‘transparent market’ means a market where current trade and price information is readily available to the public, in particular to the insurance or reinsurance undertakings.

35.

‘future discretionary bonuses’ and ‘future discretionary benefits’ mean future benefits other than index-linked or unit-linked benefits of insurance or reinsurance contracts which have one of the following characteristics:

(a)

they are legally or contractually based on one or more of the following results:

(i)

the performance of a specified group of contracts or a specified type of contract or a single contract;

(ii)

the realised or unrealised investment return on a specified pool of assets held by the insurance or reinsurance undertaking;

(iii)

the profit or loss of the insurance or reinsurance undertaking or fund corresponding to the contract;

(b)

they are based on a declaration of the insurance or reinsurance undertaking and the timing or the amount of the benefits is at its full or partial discretion;

36.

‘basic risk-free interest rate term structure’ means a risk-free interest rate term structure which is derived in the same way as the relevant risk-free interest rate term structure to be used to calculate the best estimate referred to in Article 77(2) of Directive 2009/138/EC but without application of a matching adjustment or a volatility adjustment or a transitional adjustment to the relevant risk-free rate structure in accordance with Article 308c of that Directive;

37.

‘matching adjustment portfolio’ means a portfolio of insurance or reinsurance obligations to which the matching adjustment is applied and the assigned portfolio of assets as referred to in Article 77b(1)(a) of Directive 2009/138/EC.

38.

‘SLT Health obligations’ means health insurance obligations that are assigned to the lines of business for life insurance obligations in accordance with Article 55(1).

39.

‘NSLT Health obligations’ means health insurance obligations that are assigned to the lines of business for non-life insurance obligations in accordance with Article 55(1).

40.

‘Collective investment undertaking’ means an undertaking for collective investment in transferable securities (UCITS) as defined in Article 1(2) of Directive 2009/65/EC of the European Parliament and of the Council(2) or an alternative investment fund (AIF) as defined in Article 4(1)(a) of Directive 2011/61/EU of the European Parliament and of the Council(3);

41.

in relation to an insurance or reinsurance undertaking, ‘major business unit’ means a defined segment of the insurance and reinsurance undertaking that operates independently from other parts of the undertaking and has dedicated governance resources and procedures within the undertaking and which contains risks that are material in relation to the entire business of the undertaking;

42.

in relation to an insurance or reinsurance group, ‘major business unit’ means a defined segment of the group that operates independently from other parts of the group and has dedicated governance resources and procedures within the group and which contains risks that are material in relation to the entire business of the group; any legal entity belonging to the group is a major business unit or consists of several major business units;

43.

‘administrative, management or supervisory body’ shall mean, where a two-tier board system comprising of a management body and a supervisory body is provided for under national law, the management body or the supervisory body or both of those bodies as specified in the relevant national legislation or, where nobody is specified in the relevant national legislation, the management body;

44.

‘aggregate maximum risk exposure’ means the sum of the maximum payments, including expenses that the special purpose vehicles may incur, excluding expenses that meet all of the following criteria:

(a)

the special purpose vehicle has the right to require the insurance or reinsurance undertaking which has transferred risks to the special purpose vehicle to pay the expense;

(b)

the special purpose vehicle is not required to pay the expense unless and until an amount equal to the expense has been received from the insurance or reinsurance undertaking which has transferred the risks to the special purpose vehicle;

(c)

the insurance or reinsurance undertaking which has transferred risks to the special purpose vehicle does not include the expense as an amount recoverable from the special purpose vehicle in accordance with Article 41 of this Regulation.

45.

‘existing insurance or reinsurance contract’ means an insurance or reinsurance contract for which insurance or reinsurance obligations have been recognised;

46.

‘the expected profit included in future premiums’ means the expected present value of future cash flows which result from the inclusion in technical provisions of premiums relating to existing insurance and reinsurance contracts that are expected to be received in the future, but that may not be received for any reason, other than because the insured event has occurred, regardless of the legal or contractual rights of the policyholder to discontinue the policy.

47.

‘mortgage insurance’ means credit insurance that provides cover to lenders in case their mortgage loans default.

48.

‘subsidiary undertaking’ means any subsidiary undertaking within the meaning of Article 22(1) and (2) of Directive 2013/34/EU, including subsidiaries thereof;

49.

‘related undertaking’ either a subsidiary undertaking or other undertaking in which a participation is held, or an undertaking linked with another undertaking by a relationship as set out in Article 22(7) of Directive 2013/34/EU;

50.

‘regulated undertaking’ means ‘regulated entity’ within the meaning of Article 2(4) of Directive 2002/87/EC of the European Parliament and of the Council(4);

51.

‘non-regulated undertaking’ means any undertaking other than those listed in Article 2(4) of Directive 2002/87/EC;

52.

‘non-regulated undertaking carrying out financial activities’ means a non-regulated undertaking which carries one or more of the activities referred to in Annex I of Directive 2013/36/EU of the European Parliament and of the Council(5) where those activities constitute a significant part of its overall activity;

53.

‘ancillary services undertaking’ means a non-regulated undertaking the principal activity of which consists of owning or managing property, managing data-processing services, health and care services or any other similar activity which is ancillary to the principal activity of one or more insurance or reinsurance undertakings.

54.

‘UCITS management company’ means a management company within the meaning of Article 2(1)(b) of Directive 2009/65/EC or an investment company authorised pursuant to Article 27 of that Directive provided that it has not designated a management company pursuant to that Directive;

55.

‘alternative investment fund manager’ means an alternative investment funds manager within the meaning of Article 4(1)(b) of Directive 2011/61/EU;

56.

‘institutions for occupational retirement provision’ means institutions within the meaning of Article 6(a) of Directive 2003/41/EC of the European Parliament and of the Council(6);

57.

‘domestic insurance undertaking’ means an undertaking authorised and supervised by third-country supervisory authorities which would require authorisation as an insurance undertaking in accordance with Article 14 of Directive 2009/138/EC if its head office were situated in the Union;

58.

‘domestic reinsurance undertaking’ means an undertaking authorised and supervised by third-country supervisory authorities which would require authorisation as a reinsurance undertaking in accordance with Article 14 of Directive 2009/138/EC if its head offices were situated in the Union.

Article 2 Expert judgement

1. Where insurance and reinsurance undertakings make assumptions about rules relating to the valuation of assets and liabilities, technical provisions, own funds, solvency capital requirements, minimum capital requirements and investment rules, these assumptions shall be based on the expertise of persons with relevant knowledge, experience and understanding of the risks inherent in the insurance or reinsurance business.

2. Insurance and reinsurance undertakings shall, taking due account of the principle of proportionality, ensure that internal users of the relevant assumptions are informed about their relevant content, their degree of reliability and their limitations. For that purpose, service providers to whom functions or activities have been outsourced shall be considered to be internal users.

SECTION 2 External credit assessments

Article 3 Association of credit assessments to credit quality steps

The scale of credit quality steps referred to in Article 109a(1) of Directive 2009/138/EC shall include credit quality steps 0 to 6.

Article 4 General requirements on the use of credit assessments

1. Insurance or reinsurance undertakings may use an external credit assessment for the calculation of the Solvency Capital Requirement in accordance with the standard formula only where it has been issued by an External Credit Assessment Institution (ECAI) or endorsed by an ECAI in accordance with Regulation (EC) No 1060/2009 of the European Parliament and of the Council(7).

2. Insurance or reinsurance undertakings shall nominate one or more ECAI to be used for the calculation of the Solvency Capital Requirement according to the standard formula.

3. The use of credit assessments shall be consistent and such assessments shall not be used selectively

4. When using credit assessments, insurance and reinsurance undertakings shall comply with all of the following requirements:

(a) where an insurance or reinsurance undertaking decides to use the credit assessments produced by a nominated ECAI for a certain class of items, it shall use those credit assessments consistently for all items belonging to that class;

(b) where an insurance or reinsurance undertaking decides to use the credit assessments produced by a nominated ECAI, it shall use them in a continuous and consistent way over time;

(c) an insurance or reinsurance undertaking shall only use nominated ECAI credit assessments that take into account all amounts of principal and interest owed to it;

(d) where only one credit assessment is available from a nominated ECAI for a rated item, that credit assessment shall be used to determine the capital requirements for that item;

(e) where two credit assessments are available from nominated ECAIs and they correspond to different parameters for a rated item, the assessment generating the higher capital requirement shall be used;

(f) where more than two credit assessments are available from nominated ECAIs for a rated item, the two assessments generating the two lowest capital requirements shall be used. If the two lowest capital requirements are different, the assessment generating the higher capital requirement of those two credit assessments shall be used. If the two lowest capital requirements are the same, the assessment generating that capital requirement shall be used;

(g) where available, insurance and reinsurance undertakings shall use both solicited and unsolicited credit assessments.

5. Where an item is part of the larger or more complex exposures of the insurance or reinsurance undertaking, the undertaking shall produce its own internal credit assessment of the item and allocate it to one of the seven steps in a credit quality assessment scale. Where the own internal credit assessment generates a lower capital requirement than the one generated by the credit assessments available from nominated ECAIs, then the own internal credit assessment shall not be taken into account for the purposes of this Regulation.

6. For the purposes of paragraph 5, the larger or more complex exposures of an undertaking shall include type 2 securitisation positions as referred to in Article 177(3) and resecuritisation positions.

Article 5 Issuers and issue credit assessment

1. Where a credit assessment exists for a specific issuing program or facility to which the item constituting the exposure belongs, that credit assessment shall be used.

2. Where no directly applicable credit assessment exists for a certain item, but a credit assessment exists for a specific issuing program or facility to which the item constituting the exposure does not belong or a general credit assessment exists for the issuer, that credit assessment shall be used in either of the following cases:

(a) it produces the same or higher capital requirement than would otherwise be the case and the exposure in question ranks pari passu or junior in all respects to the specific issuing program or facility or to senior unsecured exposures of that issuer, as relevant;

(b) it produces the same or lower capital requirement than would otherwise be the case and the exposure in question ranks pari passu or senior in all respects to the specific issuing program or facility or to senior unsecured exposures of that issuer, as relevant.

In all other cases, insurance or reinsurance undertakings shall consider that there is no credit assessment by a nominated ECAI available for the exposure.

3. Credit assessments for issuers within a corporate group shall not be used as the credit assessment for another issuer within the same corporate group.

Article 6 Double credit rating for securitisation positions

By way of derogation from Article 4(4)(d), where only one credit assessment is available from a nominated ECAI for a securitisation position, that credit assessment shall not be used. The capital requirements for that item shall be derived as if no credit assessment by a nominated ECAI is available.

(1)

Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, (OJ L 176, 27.6.2013, p. 1).

(2)

Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS)(OJ L 302, 17.11.2009, p. 32).

(3)

Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, p. 1).

(4)

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 and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council (OJ L 35, 11.2.2003, p. 1).

(5)

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).

(6)

Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision (OJ L 235, 23.9.2003, p. 10).

(7)

Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (OJ L 302, 17.11.2009, p. 1).