Question ID: 984
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Topic: Solvency Capital Requirement (SCR)
Article: 173
Status: Final
Date of submission: 21 Oct 2016
Question
We are planning a major business handover within the group where a significant part of the insurance business will be moved from the parent company to the local branches. In order cover the liabilities and to ensure the solvency of this business a necessary amount of assets will also be moved in the process.
Our question concerns the equity transitional. We understand that we cannot apply equity transitional to the equity investments which are traded in the process (sell equity->move cash from parent company to the local branches->buy equity). But are we allowed to preserve the transitional for the equity investments which are simply moved from the parent company to local branches?
EIOPA answer
General assumptions:
· Company A is an insurance or reinsurance undertaking established in the territory of a Member State
· At the outset A holds equities that meet the condition for the application of the transitional set out in Article 308b(13) Solvency II (i.e. they were bought by A on or before 1 January 2016).
Case 1: A local branch B represents a part of A (i.e. B is not a separate legal entities). A transfers the equities to B.
For the purpose of the calculation of the Solvency Capital Requirement of A ("solo SCR"), the condition for the application of the equity transitional shall be considered to be met after the transfer if A never ceased to be the legal owner of the equities. The transfer of the equities does not alter the treatment in terms of the calculation of a group SCR.
Case B: B is a subsidiary (i.e. a separate legal entity). The equities are sold from A to B. A and B are included in the calculation of a group SCR for a group C with the accounting consolidation method.
For the purpose of the calculation of the Solvency Capital Requirement of B ("solo SCR") the equities do not meet the conditions set out in Article 308b(13) Solvency II. For the purpose of the calculation of the group SCR of C, the condition for the application of the equity transitional shall be considered to be met after the sale if at all times either A or B were the legal owner of the equities.