ARTICLE 18(1)(A) OF THE SOLVENCY II DIRECTIVE STATES THAT “THE HOME MEMBER STATE SHALL REQUIRE EVERY UNDERTAKING FOR WHICH AUTHORISATION IS SOUGHT IN REGARD TO INSURANCE UNDERTAKINGS, TO LIMIT THEIR OBJECTS TO THE BUSINESS OF INSURANCE AND OPERATIONS ARISING DIRECTLY THEREFROM, TO THE EXCLUSION OF ALL OTHER COMMERCIAL BUSINESS”. FURTHERMORE, RECITAL 16 OF THE SOLVENCY II DIRECTIVE STATES, “THE MAIN OBJECTIVE OF INSURANCE AND REINSURANCE REGULATION AND SUPERVISION IS THE ADEQUATE PROTECTION OF POLICY HOLDERS AND BENEFICIARIES”. IT IS OUR INTERPRETATION OF ARTICLE 18(1)(A) THAT INDUSTRIAL FORESTRY (SILVICULTURAL ACTIVITIES) IS NOT AN OPERATION ARISING DIRECTLY FROM THE BUSINESS OF INSURANCE. THIS INTERPRETATION DOES NOT LIMIT INSURANCE UNDERTAKINGS FROM INVESTING IN COMPANIES CARRYING OUT INDUSTRIAL FORESTRY, AS LONG AS THE INVESTMENT IS IN LINE WITH THE INVESTMENT RULES IN SOLVENCY II, I.E. ARTICLES 132- 135 AND CONNECTED ARTICLES IN THE SOLVENCY II REGULATION. THIS INTERPRETATION DOES HOWEVER LIMIT INSURANCE UNDERTAKINGS FROM CARRYING OUT INDUSTRIAL FORESTRY (SILVICULTURAL ACTIVITIES) WITHIN THE INSURANCE UNDERTAKING ITSELF, I.E. BY OWNING THE FOREST DIRECTLY AND MANAGING IT INDUSTRIALLY (OR OUTSOURCING THE MANAGEMENT). ARTICLE 1(53) OF THE SOLVENCY II REGULATION STATES THE FOLLOWING DEFINITION: “‘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”.

The answer to this question is provided by the European Commission.

The scope of activities and investments that an insurer may undertake is framed in Directive 2009/138/EC1, in particular, in Article 18(1) and Articles 132-135. With regards to Article 18(1)(a) of the Solvency II Directive, it requires insurance undertakings to limit their objects to the business of insurance and operations arising directly therefrom, to the exclusion of all other commercial business. In other words, insurance undertakings are not authorised to conduct commercial business outside of the business tied to the classes listed in Annex I
and Annex II of the Directive or outside the operations that arise directly therefrom. It is for supervisory authorities to assess the business plan and operations of individual insurance undertakings, including from the perspective as to whether all operations pertain to the insurance business or directly arise therefrom.

The Solvency II framework does not restrict the scope of investment operations to particular activities or categories of assets. In this regard, Article 133 of the Solvency II Directive establishes the general principle of freedom of investments. This is without prejudice to the insurance undertaking’s obligation to comply with the relevant investment rules and principles, such as for example the prudent person principle enshrined in
Article 132 of Solvency II Directive. For the purpose of assessing that the prudent person principle is complied with, special attention should be paid to aspects such as the nature of the investment and, among other aspects, the impact of the investment or the investment activity on the undertaking’s risk profile. Pursuant to Article 36 of the Solvency II Directive, supervisory authorities are empowered to take remedial action if an investment does not comply with the relevant investment and valuation rules or if it jeopardises the adequate functioning of the system of governance or risk management system of the insurer.

Article 1(53) of Commission Delegated Regulation (EU) 2015/352 defines an ancillary service undertaking for the purpose of identifying the ancillary entities relevant to the group requirements laid down in the Delegated Regulation. The definition of ancillary service undertaking provided in Article 1(53) of the Delegated Regulation is not intended to determine the scope of an insurer’s activities or investments, and is not an interpretative tool of Article 18(1)(a) of the Solvency II Directive insofar as the ratio legis of Article 1(53) is to apply the provisions related to insurance groups, notably Articles 333 and 335, and the Solvency II Delegated
Act is intended to supplement and not interpret the provisions under the Directive. 

Disclaimer provided by the European Commission:

The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies, in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.