Adjustment for the loss-absorbing capacity of technical provisions

1. The adjustment for the loss-absorbing capacity of technical provisions shall be equal to the following:

Adj TP=-max(min(BSCR-nBSCR;FDB);0)

where:

(a) BSCR denotes the Basic Solvency Capital Requirement referred to in Article 103(a) of Directive 2009/138/EC;

(b) nBSCR denotes the net Basic Solvency Capital Requirement as referred to in paragraph 2 of this Article;

(c) (c) FDB denotes the technical provisions without risk margin in relation to future discretionary benefits

2. The net Basic Solvency Capital Requirement shall be calculated in accordance with Section 1, Subsection 1 to 7 of Chapter V with all the following modifications:

(a) where the calculation of a module or sub-module of the Basic Solvency Capital Requirement is based on the impact of a scenario on the basic own funds of insurance and reinsurance undertakings, the scenario can change the value of the future discretionary benefits included in technical provisions;

(b) the scenario based calculations of the life underwriting risk module, the SLT health underwriting risk sub-module, the health catastrophe risk sub-module, the market risk module and the counterparty default risk module as well as the scenario-based calculation set out in points (c) and (d) shall take into account the impact of the scenario on future discretionary benefits included in technical provisions; this shall be done on the basis of assumptions on future management actions that comply with Article 23;

(c) instead of the capital requirement for counterparty default risk on type 1 exposures referred to in Article 189(1), the calculation shall be based on the capital requirement that is equal to the loss in basic own funds that would result from an instantaneous loss, due to default events relating to type 1 exposures, of the amount of the capital requirement for counterparty default risk on type 1 exposures referred to in Article 189(1);

(d) where insurance and reinsurance undertakings use a simplified calculation for a specific capital requirement as set out in Articles 91, 92, 93, 94, 95(1), 95(2), 96, 101, 103(1)(a), 103(1)(b) or 104 the undertakings shall base the calculation on the capital requirement that is equal to the loss in basic own funds that would result from an instantaneous loss of the amount of the capital requirement referred to in the relevant Article and shall assume that the instantaneous loss is due to the risk that the capital requirement referred to in that Article captures.

3. For the purposes of point (b) of paragraph 2, insurance and reinsurance undertakings shall take into account any legal, regulatory or contractual restrictions in the distribution of future discretionary benefits.