Volume measure for non-life premium and reserve risk

1. The volume measure for non-life premium and reserve risk shall be equal to the sum of the volume measures for premium and reserve risk of the segments set out in Annex II.

For all segments set out in Annex II, the volume measure of a particular segment s shall be equal to the following:

V s = (V (prem;s) + V (res;s) ) * ( 0,75 + 0,25 * DIV s)

where:

(a) V (prem,s) denotes the volume measure for premium risk of segment s;

(b) V (res,s) denotes the volume measure for reserve risk of segment s;

(c) DIV s denotes the factor for geographical diversification of segment s.

3. For all segments set out in Annex II, the volume measure for premium risk of a particular segment s shall be equal to the following:

V prem;s = max[P s ; P (last;s)] + FP (existing;s) + FP (future;s)

where:

(a) P s denotes an estimate of the premiums to be earned by the insurance or reinsurance undertaking in the segment s during the following 12 months;

(b) P (last,s) denotes the premiums earned by the insurance or reinsurance undertaking in the segment s during the last 12 months;

(c) FP (existing,s) denotes the expected present value of premiums to be earned by the insurance or reinsurance undertaking in the segment s after the following 12 months for existing contracts;

(d) FP (future,s) denotes the expected present value of premiums to be earned by the insurance and reinsurance undertaking in the segment s for contracts where the initial recognition date falls in the following 12 months but excluding the premiums to be earned during the 12 months after the initial recognition date.

4. For all segments set out in Annex II, insurance and reinsurance undertakings may, as an alternative to the calculation set out in paragraph 3 of this Article, choose to calculate the volume measure for premium risk of a particular segment s in accordance with the following formula:

V prem;s = P s  + FP (existing;s) + FP (future;s)

provided that the all of following conditions are met:

(a) the administrative, management or supervisory body of the insurance or reinsurance undertaking has decided that its earned premiums in the segment s during the following 12 months will not exceed P s ;

(b) the insurance or reinsurance undertaking has established effective control mechanisms to ensure that the limits on earned premiums referred to in point (a) will be met;

(c) the insurance or reinsurance undertaking has informed its supervisory authority about the decision referred to in point (a) and the reasons for it.

For the purposes of this calculation, the terms P s , FP (existing,s) and FP (future,s) shall be denoted in accordance with points (a), (c) and (d) of paragraph 3.

5. For the purposes of the calculations set out in paragraphs 3 and 4, premiums shall be net, after deduction of premiums for reinsurance contracts. The following premiums for reinsurance contracts shall not be deducted:

(a) premiums in relation to non-insurance events or settled insurance claims that are not accounted for in the cash-flows referred to in Article 41(3);

(b) premiums for reinsurance contracts that do not comply with Articles 209, 210, 211 and 213.

6. For all segments set out in Annex II, the volume measure for reserve risk of a particular segment shall be equal to the best estimate of the provisions for claims outstanding for the segment, after deduction of the amounts recoverable from reinsurance contracts and special purpose vehicles, provided that the reinsurance contracts or special purpose vehicles comply with Articles 209, 210, 211 and 213. The volume measure shall not be a negative amount.

7. For all segments set out in Annex II, the default factor for geographical diversification of a particular segment shall be either 1 or calculated in accordance with Annex III.