Question ID: 438
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Article: 330, 100
Status: Final
Date of submission: 24 Jul 2017
Question
In determining the Own Funds available to cover the Group's SCR, Article 330 (1)(a) and (b) requires us to consider whether any regulatory restrictions might prevent the own funds being transferred to another entity or otherwise used to cover losses elsewhere in the group.
Article 100 of the Directive requires entities to hold Own Funds of at least 100% of SCR.
Does the requirement in Article 100 of the Directive create a regulatory restriction as described by Article 330 of the Delegated Acts?
We note that treating the requirement to hold 100% SCR as a regulatory restriction would effectively remove inter-company diversification from the Group solvency position (via the Own Funds rather than the SCR), which would appear to go against the principles of Solvency II. In particular Recitals 101 (Group SCR should allow for global diversification of risks) and 141 (desire for a Group support regime). However, it would appear the current wording can be interpreted in this way, and we would appreciate your clarification on the matter.
EIOPA answer
Requirements set in Article 100 of the Solvency II Directive should not in principle be considered as restricting the availability of the own fund items or of the assets at the level of the group, in the meaning of Article 330 of Commission Delegated Regulation 2015/35.
This does not preclude National Supervisory Authorities (NSAs) from challenging the availability and transferability of own funds as assessed by groups. As a result of any challenge posed by NSAs, some Own Funds may be deemed not available.
In any case groups should be able to demonstrate the availability and transferability of any own funds item when requested/challenged by NSAs.
More generally, it is required for groups to set out their own assessment of any items which might be deducted from own funds owing to any significant restriction affecting the availability, fungibility or transferability of own funds within the undertaking. This requirement is outlined by Article 297 (1) (h), Article 359 (e) (ii) and Article 372 (2) (c) (xi) of the Delegated Regulation as well as Article 246 (4) of Solvency II Directive.
Groups should engage from an early stage with the group supervisors regarding any doubts on the availability and transferability of those own funds.