1.For the purpose of determining the basic own funds of insurance and reinsurance undertakings, basic own funds as referred to in [F1the Own Funds part of the PRA Rulebook] shall be reduced by the full value of participations, as referred to in [F2paragraph 6], in a financial and credit institution that exceeds 10 % of items included in points (a) (i), (ii), (iv) and (vi) of Article 69.
2.For the purpose of determining the basic own funds of insurance and reinsurance undertakings, basic own funds as referred to in Article 88 of Directive 2009/138/EC shall be reduced by the part of the value of all participations, as referred to in [F3paragraph 6 below], in financial and credit institutions, other than participations referred to in paragraph 1, that exceeds 10 % of items included in points (a) (i), (ii), (iv) and (vi) of Article 69.
[F43 . Notwithstanding paragraphs 1 and 2, insurance and reinsurance undertakings shall not deduct strategic participations as referred to in Article 171 which are included in the calculation of the group solvency on the basis of method 1 as set out in [F5the Financial Conglomerates part of the PRA Rulebook] or on the basis of method 1 as set out in Article 230 of Directive 2009/138/EC.]
4.The deductions set out in paragraph 2 shall be applied on a pro-rata basis to all participations referred to in that paragraph.
5.The deductions set out in paragraphs 1 and 2 shall be made from the corresponding tier in which the participation has increased the own funds of the related undertaking as follows:
(a)holdings of Common Equity Tier 1 items of financial and credit institutions shall be deducted from the items included in points (a) (i), (ii), (iv) and (vi) of Article 69;
(b)holdings of Additional Tier 1 instruments of financial and credit institutions shall be deducted from the items included in points (a)(iii) and (v) and point (b) of Article 69;
(c)holdings of Tier 2 instruments of financial and credit institutions shall be deducted from the basic own-fund items included in Article 72.
[F66. Participations in financial and credit institutions must comprise the following:
(a) participations which insurance and reinsurance undertakings hold in:
(i) credit institutions and financial institutions within the meaning of the United Kingdom law which implemented Article 4(1) and (5) of Directive 2006/48/EC;
(ii) investment firms within the meaning of the United Kingdom law which implemented point 1 of Article 4(1) of Directive 2004/39/EC;
(b) subordinated claims and instruments referred to in the United Kingdom law which implemented Articles 63 and 64(3) of Directive 2006/48/EC which insurance and reinsurance undertakings hold in respect of the entities defined in point (a) of this paragraph in which they hold a participation.]
Textual Amendments
F1 Words in Art. 68(1) substituted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 11(12)(a)(i) (as amended by S.I. 2020/1385, regs. 1(2), 54(2) and with savings in S.I. 2019/680, reg. 11)
F2 Words in Art. 68(1) substituted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 11(12)(a)(ii) (as amended by S.I. 2020/1385, regs. 1(2), 54(2) and with savings in S.I. 2019/680, reg. 11)
F3 Words in Art. 68(2) substituted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 11(12)(b) (as amended by S.I. 2020/1385, regs. 1(2), 54(2) and with savings in S.I. 2019/680, reg. 11)
F4 Substituted by Commission Delegated Regulation (EU) 2016/467 of 30 September 2015 amending Commission Delegated Regulation (EU) 2015/35 concerning the calculation of regulatory capital requirements for several categories of assets held by insurance and reinsurance undertakings (Text with EEA relevance).
F5 Words in Art. 68(3) substituted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 11(12)(c) (as amended by S.I. 2020/1385, regs. 1(2), 54(2) and with savings in S.I. 2019/680, reg. 11)
F6 Art. 68(6) inserted (31.12.2020) by The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 (S.I. 2019/407), regs. 1(2), 11(12)(d) (as amended by S.I. 2020/1385, regs. 1(2), 54(2) and with savings in S.I. 2019/680, reg. 11)
Editorial Information
X1 Substituted by Corrigendum to Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (Official Journal of the European Union L 12 of 17 January 2015).