Question ID: 3591
Regulation Reference: Guidelines on ring-fenced funds
Status: Rejected
Date of submission: 10 Jun 2026
Question
Should national contribution-based allocation rules for traditional with-profit life insurance be assessed as potentially giving rise to a ring-fenced fund under Article 80 of Delegated Regulation (EU) 2015/35 where the rules restrict the ability of assets, surplus, future profit emergence or own-fund items attributable to one policyholder group to absorb losses elsewhere in the undertaking on a going-concern basis? In particular, please clarify the following points:
1. Does the recognition of individual bonus potentials within technical provisions mean that those amounts are not themselves restricted own-fund items, while still allowing the wider arrangement to be assessed for restrictions on associated own funds, surplus or assets?
2. Can such an arrangement give rise to an RFF if assets, surplus, future profit emergence or own-fund items attributable to a policyholder group are restricted in their ability to absorb losses outside that group?
3. Where national rules require future positive results attributable to the same group to restore previously reduced individual bonus potentials before other allocations may be made, should that restoration obligation be treated as a restriction on transferability for RFF purposes?
4. Is such an arrangement comparable to the “experience funds” example in EIOPA Guideline 2 only where the relevant surplus is fully transferable within the undertaking, or can group-specific restoration and anti-redistribution rules mean that the arrangement is not fully transferable?
5. Can an RFF arise at the level of a policyholder group, interest-rate group or contribution group, even where there is no separately constituted legal fund?
6. If an RFF exists, should the perimeter be limited to the assets, liabilities and restricted own-fund items properly attributable to the affected group, with the individual bonus potentials continuing to be treated as technical provisions?
Background of the question
The question concerns whether group-specific allocation, loss-absorption and restoration rules restrict the transferability of assets, surplus, future profit emergence or own-fund items for Solvency II ring-fenced fund purposes.
A life insurance undertaking writes traditional with-profit business subject to legally binding rules governing the allocation of realised results between defined groups of policyholders.
Under those rules, contracts are divided into homogeneous groups of policies based on common characteristics. The relevant groups include policies benefiting from collective surplus components and policy-specific accrued surplus components recognised within technical provisions.
Where a group has a negative realised result after the allocation of discretionary benefits, the loss must, under those rules, be absorbed according to a prescribed order:
- first by collective surplus components attributable to that group;
- if insufficient, by policy-specific surplus components and other amounts attributable to policies in that group;
- thereafter by the undertaking’s general own funds or capital resources.
Where policy-specific surplus components have been used to absorb losses, subsequent positive results attributable to the same group must generally be used to restore those components before other allocations may be made, subject only to limited exceptions.
Furthermore, the applicable rules restrict the extent to which economic value attributable to one group of policyholders may be used to cover losses or support benefits of another group, except where such transfers arise from contractual insurance risk-sharing or are explicitly permitted.
EIOPA answer
This question has been rejected because the issue it deals with is already explained in EIOPA’s Guidelines on ring-fenced funds, especially Guidelines 1, 3, 4, 6 and 7.
Where national contribution-based allocation rules restrict the ability of assets, surplus, future profit emergence or own-fund items attributable to a defined policyholder group to absorb losses elsewhere in the undertaking on a going-concern basis, insurance and reinsurance undertakings should assess whether such arrangements constitute ring-fenced funds. This assessment should be consistent with EIOPA’s Guidelines on ring-fenced funds.