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

CHAPTER II U.K. INTERNAL MODELS FOR THE CALCULATION OF THE CONSOLIDATED GROUP SOLVENCY CAPITAL REQUIREMENT

SECTION 1 U.K. Full and partial internal models used to calculate only the group solvency capital requirement

Article 343 U.K. Application for the use of an internal model to calculate only the consolidated group Solvency Capital Requirement

1. The application to calculate the consolidated group Solvency Capital Requirement using an internal model, in accordance with Article 230(2) of Directive 2009/138/EC, shall be submitted to the group supervisor in writing in an official language of the group supervisor's Member State, or in a language for which the group supervisor has given prior approval.

2. For the purposes of this Chapter, the supervisory authorities of all the Member States in which the head offices of related undertakings included in the scope of the internal model are situated shall be referred to as ‘the supervisory authorities involved in the assessment of the application’.

3. The group supervisor shall inform the college of supervisors of the receipt of the application without delay and shall also forward the application to the other supervisory authorities involved in the assessment of the application.

4. A request by one of the supervisory authorities involved in the assessment of the application to provide all or part of the application in a language different from the language in which the application is provided to the group supervisor, shall first be made to the group supervisor. The group supervisor shall, after consultation with the other supervisory authorities involved in the assessment of the application, require that the application, or the relevant part of it, be provided in a language most commonly understood by the supervisory authorities involved.

5. In addition to the documents and information required pursuant to Articles 112 and 113 of Directive 2009/138/EC, an application to use an internal model to calculate the consolidated group Solvency Capital Requirement shall include all of the following documents and information:

(a) regarding the scope of the model:

(i)

a list of the related undertakings that are included in the scope of the internal model for the calculation of the consolidated group Solvency Capital Requirement; for each undertaking, the list shall include a reference to its supervisory authority, the lines of business written by the related insurance and reinsurance undertaking, the method used for the purposes of determining the consolidated data in accordance with Article 335 of this Regulation and the proportional share applied in accordance with Article 221 of Directive 2009/138/EC;

(ii)

the legal and organisational structure of the group, with a description of all subsidiaries, material related undertakings within the meaning of Article 256a of Directive 2009/138/EC and significant branches within the meaning of Article 354(1) of this Regulation and information on relevant operations and transactions within the group, unless this information has not changed since the last reported group regular supervisory reporting pursuant to article 373 of this Regulation;

(iii)

where applicable, a list of the related undertakings excluded from the scope of the partial internal model for the calculation of the consolidated group Solvency Capital Requirement, together with an explanation of the reasons for their exclusion; a description shall be provided of the methods used to assess the risks in these excluded related undertakings in order to demonstrate that the exclusion does not lead to an underestimation of the overall risks to which the group is exposed; the application shall demonstrate that the consolidated group Solvency Capital Requirement calculated using a combination of the internal model and the standard formula will adequately reflect the overall risk profile of the group;

(iv)

for each related undertaking included in the scope of the internal model for the calculation of the consolidated group Solvency Capital Requirement, a justification of the reasons why the internal model covers a related undertaking for the calculation of the consolidated group Solvency Capital Requirement but it is not used to calculate the Solvency Capital Requirement of that related undertaking; for this purpose and in order to justify that an application is not submitted in accordance with the procedure laid down in Article 231 of Directive 2009/138/EC, the application shall include an explanation of how the internal model used to calculate the consolidated group Solvency Capital Requirement differs from and interacts with an internal model used for the calculation of the Solvency Capital Requirement of any of the related insurance or reinsurance undertakings previously approved by its supervisory authority; the participating undertaking shall provide information on any future plans to extend the use of the internal model to calculate the Solvency Capital Requirement of any related insurance or reinsurance undertaking;

(b) regarding the group's capital requirements:

(i)

an estimation of the consolidated group Solvency Capital Requirement calculated with the internal model and with the standard formula for the last time prior to the application when the consolidated group Solvency Capital Requirement was calculated with the standard formula;

(ii)

for each related undertaking, the Solvency Capital Requirement calculated with the standard formula for the last point in time prior to the application;

(iii)

where applicable, the regulatory capital requirement for related undertakings that are also regulated undertakings, other than insurance and reinsurance undertakings, included in the scope of the internal model for the last time prior to the application when the consolidated group Solvency Capital Requirement was calculated with the standard formula;

(iv)

an explanation of the difference between the sum of the Solvency Capital Requirements of all the related insurance and reinsurance undertakings of the group and the consolidated group Solvency Capital Requirement calculated with the internal model.

In case an application is submitted before any Solvency Capital Requirement must be calculated, the Solvency Capital Requirements referred to in points (i), (ii) and (iii) shall be calculated for a point in time before the date of the submission of the application.

Article 344 U.K. Assessment of the application for the use of an internal model to calculate only the consolidated group Solvency Capital Requirement

1. Prior to making its final decision, in order to allow a proper assessment of the application and where relevant, to require the applicant to submit an application under Article 231 of Directive 2009/138/EC, the group supervisor shall consult the supervisory authorities involved in the assessment of the application.

2. During the assessment of the application, the supervisory authorities within the college of supervisors, that are not the supervisory authorities involved in the assessment of the application as referred to in Article 343(2), shall also be allowed to participate in the assessment of the application. Their participation shall be limited to identifying and preventing any of the following circumstances:

(a) where the exclusion of parts of the business from the scope of the internal model leads to a material underestimation of the risks of the group;

(b) where the internal model conflicts with an internal model previously approved or in the process of approval by the relevant supervisory authority used for the calculation of the Solvency Capital Requirement of any of the related insurance or reinsurance undertakings.

3. Where applicable, the assessment of the application shall include an evaluation of whether the explanation provided in accordance with Article 343(5)(a)(iii) of the reasons for the exclusion of related undertakings from the internal model for the calculation of the group solvency is appropriate in order to demonstrate that the overall risks to which the group is exposed are not underestimated by using a partial internal model.

4. The assessment of the application shall include an evaluation of whether the justification provided in accordance with Article 343(5)(a)(iv) of the reasons why the internal model covers a related undertaking for the calculation of the consolidated group Solvency Capital Requirement but it is not used to calculate the Solvency Capital Requirement of that related undertaking, is appropriate in order to justify that an application is not submitted in accordance with the procedure laid down in Article 231 of Directive 2009/138/EC.

Article 345 U.K. Decision on the application and transitional plan to extend the scope of a partial internal model used to calculate only the consolidated group Solvency Capital Requirement

1. After consulting the other supervisory authorities as set out in Article 344(1) and (2), the group supervisor shall make its own decision on the application. The group supervisor shall provide its decision to the participating undertaking and the other supervisory authorities involved in the assessment of the application. The decision shall be written in an official language of the Member State of the group supervisor.

2. Where the supervisory authorities involved in the assessment of the application comprise supervisory authorities from more than one Member State, the group supervisor shall, after consultation with the other supervisory authorities and with the group itself, provide the decision referred to in paragraph 1 in another language most commonly understood by the other supervisory authorities involved.

3. After consulting the other supervisory authorities as set out in Article 344(1) and (2), the group supervisor may require the applicant to submit a realistic transitional plan to extend the scope of the internal model.

4. When an internal model has been approved under Article 230 of Directive 2009/138/EC for the purposes of the calculation of the consolidated group Solvency Capital Requirement, any subsequent application for permission to use the same internal model for calculating the Solvency Capital Requirement of an insurance or reinsurance undertaking in the group shall follow the procedure laid down in Article 231 of Directive 2009/138/EC.

Article 346 U.K. Use test for internal models used to calculate only the consolidated group Solvency Capital Requirement

1. Where an internal model is used to calculate the consolidated group Solvency Capital Requirement in accordance with Article 230(2) of Directive 2009/138/EC, the requirements set out in Articles 223 to 227 of this Regulation shall be complied with by all of the following undertakings or companies:

(a) the participating undertaking which calculates the consolidated group Solvency Capital Requirement on the basis of the internal model;

(b) each related insurance and reinsurance undertaking whose business is fully or partly in the scope of the internal model, only in relation to the output of the internal model at group level;

(c) each related insurance holding company or mixed financial holding company whose business is fully or partly in the scope of the internal model, only in relation to the output of the internal model at group level.

2. For the purposes of paragraph 1, an insurance or reinsurance undertaking or insurance holding company or mixed financial holding company shall only comply with the requirements set out in Article 225 of this Regulation in relation to the parts of the internal model which cover the risks of that undertaking and the risks of its related undertakings.

SECTION 2 U.K. Use of a group internal model

Article 347 U.K. Application to use a group internal model

1. For the purposes of this Section, ‘group internal model’ shall mean an internal model used to calculate the consolidated group Solvency Capital Requirement as well as the Solvency Capital Requirement of an insurance or reinsurance undertaking in the group, as referred to in Article 231(1) of Directive 2009/138/EC.

2. An application to use a group internal model shall be provided in writing in an official language of the group supervisor's Member State, or in a language for which the group supervisor has given prior approval.

3. For the purposes of this Section, the group supervisor and the supervisory authorities of all the Member States in which the head offices of each related insurance and reinsurance undertakings applying for the use of the group internal model to calculate their Solvency Capital Requirement are situated shall be referred to as ‘the supervisory authorities concerned’.

4. The group supervisor shall inform the college of supervisors of the receipt of the application without delay and shall also forward the application to the other supervisory authorities concerned and other supervisory authorities involved in the assessment of the application.

5. Supervisory authorities concerned may request that all or part of the application be provided in a language different from the language in which the application was provided to the group supervisor. The group supervisor shall, after consultation with the other supervisory authorities concerned, require the applicant to provide the application, or the relevant part of it, in that different language or in a language most commonly understood by the other supervisory authorities concerned.

6. An application to use a group internal model shall include the following documents and information, where applicable:

(a) the documents and information required in accordance with Article343(5) in relation to the use of an internal model for the calculation of the consolidated group Solvency Capital Requirement; in relation to Article 343(5)(a)(i), the documentation shall also include a list of all the insurance and reinsurance undertakings applying for the use of the group internal model to calculate their Solvency Capital Requirement.

(b) the documents required in accordance with Title I, Chapter VI, Section 4, Sub-section 3 of Directive 2009/138/EC in relation to the use of an internal model for the calculation of the Solvency Capital Requirement of each insurance and reinsurance undertaking in the group applying for the use of the group internal model to calculate their Solvency Capital Requirement; for this purpose, the insurance or reinsurance undertaking may restrict these documents to those whose content is not already covered in the documents submitted by the participating insurance or reinsurance undertaking in accordance with point (a).

Article 348 U.K. Assessment of the completeness of an application to use a group internal model

1. The group supervisor shall determine whether the application is complete within 45 days from the day of the receipt of the application. An application shall be considered as complete if it includes all the documentation set out in Article 347.

2. Where the group supervisor determines that the application is not complete, it shall immediately notify the applicant that the six month period referred to in Article 231 of Directive 2009/138/EC has not yet begun, specifying the documents in respect of which the application is not complete.

3. Where the group supervisor determines that the application is complete, it shall notify the applicant without delay that the application is complete and the date from which the six month period referred to in Article 231 of Directive 2009/138/EC. That date shall be the date on which the complete application was received.

Article 349 U.K. Joint decision on the application and transitional plan to extend the scope of the model

1. Prior to reaching a joint decision with other supervisory authorities concerned, as referred to in Article 231(2) of Directive 2009/138/EC, the group supervisor shall consult the other supervisory authorities involved in the assessment of the application, referred to in Article343(2) of this Regulation.

2. The joint decision by the supervisory authorities concerned shall be provided in an official language of the Member State of the group supervisor. The group supervisor shall provide the applicant and each supervisory authority concerned with the decision translated in an official language of the Member State where the applicant has its head office. Each related insurance or reinsurance undertaking applying for the use of the group internal model to calculate their Solvency Capital Requirement shall be provided with the joint decision or, where relevant, with a translation of that decision, by the supervisory authority having authorised that undertaking.

3. In the joint decision, the supervisory authorities concerned may require the applicant to submit a realistic transitional plan to extend the scope of the group internal model.

Article 350 U.K. Use test for group internal models

1. Where a group internal model is used, in accordance with Article 231(1) of Directive 2009/138/EC, the requirements set out in Articles 223 to 227 of this Regulation shall be complied with by the following undertakings:

(a) the participating undertaking which calculates the consolidated group Solvency Capital Requirement on the basis of the group internal model, in relation to the output of the internal model at group level and in case of a participating insurance or reinsurance undertaking additionally in relation to the output of the internal model at the level of that undertaking;

(b) each related insurance and reinsurance undertaking which calculates its Solvency Capital Requirement on the basis of the group internal model, both in relation to the output of the internal model at group level and at the level of the undertaking;

(c) each other related insurance and reinsurance undertaking whose business is fully or partly in the scope of the group internal model, only in relation to the output of the internal model at group level;

(d) each related insurance holding company or mixed financial holding company whose business is fully or partly in the scope of the group internal model, only in relation to the output of the internal model at group level.

2. For the purposes of paragraph 1, an insurance or reinsurance undertaking or insurance holding company or mixed financial holding company shall only comply with the requirements set out in Article 225 of this Regulation in relation to the parts of the group internal model which cover the risks of that undertaking and the risks of its related undertakings.