Ring-fenced funds requiring adjustments

1. A reduction of the reconciliation reserve referred to in Article 70(1)(e) shall be required where own-fund items within a ring-fenced fund have a reduced capacity to fully absorb losses on a going-concern basis due to their lack of transferability within the insurance or reinsurance undertaking for any of the following reasons:

(a) the items can only be used to cover losses on a defined portion of the insurance or reinsurance undertaking's insurance or reinsurance contracts;

(b) the items can only be used to cover losses in respect of certain policy holders or beneficiaries;

(c) the items can only be used to cover losses arising from particular risks or liabilities.

2. The own-fund items referred to in paragraph 1, (hereinafter referred to as ‘restricted own-fund items’), shall not include the value of future transfers attributable to shareholders.