# L_2015248EN.01009501.xml

| 24.9.2015 | EN | Official Journal of the European Union | L 248/95 |
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24.9.2015

EN

Official Journal of the European Union

L 248/95

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COMMISSION DELEGATED DECISION (EU) 2015/1602

of 5 June 2015

on the equivalence of the solvency and prudential regime for insurance and reinsurance undertakings in force in Switzerland based on Articles 172(2), 227(4) and 260(3) of Directive 2009/138/EC of the European Parliament and of the Council

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Directive 2009/138/EC of the European Parliament and the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (1), and in particular Articles 172(2), 227(4) and 260(3) thereof,

Whereas:

| (1) | Directive 2009/138/EC establishes a risk-based prudential regime for insurance and reinsurance undertakings in the Union. Full application of Directive 2009/138/EC to insurers and reinsurers in the Union will commence on 1 January 2016. |
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(1)

Directive 2009/138/EC establishes a risk-based prudential regime for insurance and reinsurance undertakings in the Union. Full application of Directive 2009/138/EC to insurers and reinsurers in the Union will commence on 1 January 2016.

| (2) | Even though the Solvency II Directive will be fully applied from 1 January 2016, the Commission may already adopt the present Delegated Decision as indicated under Article 311 of the Solvency II Directive. |
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(2)

Even though the Solvency II Directive will be fully applied from 1 January 2016, the Commission may already adopt the present Delegated Decision as indicated under Article 311 of the Solvency II Directive.

| (3) | Article 172 of Directive 2009/138/EC relates to equivalence of the solvency regime of a third country applied to reinsurance activities of undertakings with their head office in that third country. A positive equivalence determination allows reinsurance contracts concluded with undertakings having their head office in that third country to be treated in the same manner as reinsurance contracts concluded with undertakings authorised in accordance with that Directive. |
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(3)

Article 172 of Directive 2009/138/EC relates to equivalence of the solvency regime of a third country applied to reinsurance activities of undertakings with their head office in that third country. A positive equivalence determination allows reinsurance contracts concluded with undertakings having their head office in that third country to be treated in the same manner as reinsurance contracts concluded with undertakings authorised in accordance with that Directive.

| (4) | Article 227 of Directive 2009/138/EC relates to equivalence for third-country insurers that are part of groups headquartered in the Union. A positive equivalence determination allows such groups, when deduction and aggregation is used as the consolidation method for their group reporting, to take into account the calculation of capital requirements and available capital (own funds) under the rules of the non-Union jurisdiction rather than calculating them on the basis of Directive 2009/138/EC, for the purposes of calculating the group solvency requirement and eligible own funds. |
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(4)

Article 227 of Directive 2009/138/EC relates to equivalence for third-country insurers that are part of groups headquartered in the Union. A positive equivalence determination allows such groups, when deduction and aggregation is used as the consolidation method for their group reporting, to take into account the calculation of capital requirements and available capital (own funds) under the rules of the non-Union jurisdiction rather than calculating them on the basis of Directive 2009/138/EC, for the purposes of calculating the group solvency requirement and eligible own funds.

| (5) | Article 260 of Directive 2009/138/EC relates to equivalence of insurance and reinsurance undertakings, the parent undertaking of which has its head office outside the Union. In accordance with Article 261(1) of Directive 2009/138/EC, in case of a positive equivalence determination, Member States rely on the equivalent group supervision exercised by the third-country group supervisory authorities. |
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(5)

Article 260 of Directive 2009/138/EC relates to equivalence of insurance and reinsurance undertakings, the parent undertaking of which has its head office outside the Union. In accordance with Article 261(1) of Directive 2009/138/EC, in case of a positive equivalence determination, Member States rely on the equivalent group supervision exercised by the third-country group supervisory authorities.

| (6) | A third country's legal regime is to be considered as fully equivalent to that established by Directive 2009/138/EC if it complies with requirements which provide a comparable level of policyholder and beneficiary protection. Full equivalence determinations under Articles 172(2), 227(4) and 260(3) are of unlimited duration unless repealed. |
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(6)

A third country's legal regime is to be considered as fully equivalent to that established by Directive 2009/138/EC if it complies with requirements which provide a comparable level of policyholder and beneficiary protection. Full equivalence determinations under Articles 172(2), 227(4) and 260(3) are of unlimited duration unless repealed.

| (7) | On 9 March 2015, the European Insurance and Occupational Pensions Authority (EIOPA) provided advice according to Article 33(2) of Regulation (EU) No 1094/2010 of the European Parliament and of the Council (2) to the Commission on the regulatory and supervisory system for (re)insurance undertakings and groups in force in Switzerland. EIOPA's advice is based on the Swiss relevant legislative framework, including the Swiss Financial Market Supervisory Act of 22 June 2007 (FINMASA), which entered into force on 1 January 2009, the Insurance Supervision Act (ISA) of 17 December 2004 and the Insurance Supervision Ordinance (ISO) (3). The Commission has based its assessment on the information provided by EIOPA. |
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(7)

On 9 March 2015, the European Insurance and Occupational Pensions Authority (EIOPA) provided advice according to Article 33(2) of Regulation (EU) No 1094/2010 of the European Parliament and of the Council (2) to the Commission on the regulatory and supervisory system for (re)insurance undertakings and groups in force in Switzerland. EIOPA's advice is based on the Swiss relevant legislative framework, including the Swiss Financial Market Supervisory Act of 22 June 2007 (FINMASA), which entered into force on 1 January 2009, the Insurance Supervision Act (ISA) of 17 December 2004 and the Insurance Supervision Ordinance (ISO) (3). The Commission has based its assessment on the information provided by EIOPA.

| (8) | Taking into account the provisions of Commission Delegated Regulation (EU) 2015/35 (4), in particular Articles 378, 379 and 380, as well as EIOPA's advice, a number of criteria are to be applied to assess equivalence under Article 172(2), 227(4) and 260(3) of Directive 2009/138/EC, respectively. |
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(8)

Taking into account the provisions of Commission Delegated Regulation (EU) 2015/35 (4), in particular Articles 378, 379 and 380, as well as EIOPA's advice, a number of criteria are to be applied to assess equivalence under Article 172(2), 227(4) and 260(3) of Directive 2009/138/EC, respectively.

| (9) | Those criteria include certain requirements which are common to two or more of Articles 378, 379 and 380 of Delegated Regulation (EU) 2015/35, which are valid at the level of solo (5) (re)insurance undertakings and at the level of (re)insurance groups, and which cover the areas of powers, solvency, governance, transparency, cooperation between authorities and handling of confidential information, and impact of the decisions on financial stability. |
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(9)

Those criteria include certain requirements which are common to two or more of Articles 378, 379 and 380 of Delegated Regulation (EU) 2015/35, which are valid at the level of solo (5) (re)insurance undertakings and at the level of (re)insurance groups, and which cover the areas of powers, solvency, governance, transparency, cooperation between authorities and handling of confidential information, and impact of the decisions on financial stability.

| (10) | First, regarding the means, powers and responsibilities, the Swiss financial market supervisor (FINMA) has the power to effectively supervise (re)insurance activities and impose sanctions or take enforcement action where necessary, such as revoking an undertaking's business licence or replace all or part of its management. FINMA has the necessary financial and human means, expertise, capacities and mandate to effectively protect all policyholders and beneficiaries. |
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(10)

First, regarding the means, powers and responsibilities, the Swiss financial market supervisor (FINMA) has the power to effectively supervise (re)insurance activities and impose sanctions or take enforcement action where necessary, such as revoking an undertaking's business licence or replace all or part of its management. FINMA has the necessary financial and human means, expertise, capacities and mandate to effectively protect all policyholders and beneficiaries.

| (11) | Second, regarding solvency, the Swiss Solvency Test (SST) assessment of the financial position of (re)insurance undertakings or groups relies on sound economic principles, and solvency requirements are based on an economic valuation of all assets and liabilities. The SST requires (re)insurance undertakings to hold adequate financial resources and lays down criteria on technical provisions, investments, capital requirements (including minimum level of capital) and own funds, requiring timely intervention by FINMA if capital requirements are not complied with or if policyholders' interests are threatened. The capital requirements are risk-based, aiming at capturing quantifiable risks. Where a risk is not quantified, it is addressed through other measures: for instance operational risks are addressed qualitatively through the Swiss Quality Assessment (SQA). The main capital requirement, known as the target capital under the SST, is calculated to cover unexpected losses arising from the existing business. In addition, the absolute minimum capital requirement (minimum capital) for insurers varies under the SST depending on the insurance business line. Both requirements are at least as strong as the corresponding Directive 2009/138/EC requirements for all current Swiss insurers' combinations of business lines. Regarding models, insurance undertakings may use a standard model or, if required by FINMA or upon their own initiative, an internal model. |
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(11)

Second, regarding solvency, the Swiss Solvency Test (SST) assessment of the financial position of (re)insurance undertakings or groups relies on sound economic principles, and solvency requirements are based on an economic valuation of all assets and liabilities. The SST requires (re)insurance undertakings to hold adequate financial resources and lays down criteria on technical provisions, investments, capital requirements (including minimum level of capital) and own funds, requiring timely intervention by FINMA if capital requirements are not complied with or if policyholders' interests are threatened. The capital requirements are risk-based, aiming at capturing quantifiable risks. Where a risk is not quantified, it is addressed through other measures: for instance operational risks are addressed qualitatively through the Swiss Quality Assessment (SQA). The main capital requirement, known as the target capital under the SST, is calculated to cover unexpected losses arising from the existing business. In addition, the absolute minimum capital requirement (minimum capital) for insurers varies under the SST depending on the insurance business line. Both requirements are at least as strong as the corresponding Directive 2009/138/EC requirements for all current Swiss insurers' combinations of business lines. Regarding models, insurance undertakings may use a standard model or, if required by FINMA or upon their own initiative, an internal model.

| (12) | Third, regarding governance, the Swiss solvency regime requires (re)insurance undertakings to have an effective system of governance in place, imposing on them in particular a clear organisational structure, fit and proper requirements for those effectively running the undertakings, effective process for transmission of information within the undertakings and to FINMA. In addition, FINMA effectively supervises outsourced functions and activities. |
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(12)

Third, regarding governance, the Swiss solvency regime requires (re)insurance undertakings to have an effective system of governance in place, imposing on them in particular a clear organisational structure, fit and proper requirements for those effectively running the undertakings, effective process for transmission of information within the undertakings and to FINMA. In addition, FINMA effectively supervises outsourced functions and activities.

| (13) | The SST also requires (re)insurance undertakings and groups to maintain risk-management, compliance, internal audit and actuarial functions. The SST imposes a risk management system capable of identifying, measuring, monitoring, managing and reporting risks, and an effective internal control system. The requirements of Directive 2009/138/EC regarding internal audit and compliance for solo undertakings are satisfactorily addressed by the ISO, since it reinforces risk management requirements and in particular the obligation to have a compliance function. |
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(13)

The SST also requires (re)insurance undertakings and groups to maintain risk-management, compliance, internal audit and actuarial functions. The SST imposes a risk management system capable of identifying, measuring, monitoring, managing and reporting risks, and an effective internal control system. The requirements of Directive 2009/138/EC regarding internal audit and compliance for solo undertakings are satisfactorily addressed by the ISO, since it reinforces risk management requirements and in particular the obligation to have a compliance function.

| (14) | The regime in force in Switzerland requires that changes to the business policy or management of (re)insurance undertakings or groups or qualifying holdings in such undertakings or groups must be consistent with sound and prudent management. In particular, acquisitions, changes in the business plan or in qualifying holdings of (re)insurance undertakings or insurance groups are notified to FINMA, which may take appropriate sanctions if justified, such as prohibiting an acquisition. |
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(14)

The regime in force in Switzerland requires that changes to the business policy or management of (re)insurance undertakings or groups or qualifying holdings in such undertakings or groups must be consistent with sound and prudent management. In particular, acquisitions, changes in the business plan or in qualifying holdings of (re)insurance undertakings or insurance groups are notified to FINMA, which may take appropriate sanctions if justified, such as prohibiting an acquisition.

| (15) | Fourth, regarding transparency, (re)insurance undertakings and groups are required to provide FINMA with any information necessary to supervision, and publish, at least annually, a report on their solvency and financial condition. The requirements of Directive 2009/138/EC regarding public disclosure are satisfactorily addressed by the ISO, since the types of qualitative and quantitative information to be disclosed are in line with Directive 2009/138/EC. Under the ISO, (re)insurance undertakings and groups have to disclose their business activities, performance, risk management, risk profile, methods used for assessment regarding in particular provisions, capital management and solvency. |
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(15)

Fourth, regarding transparency, (re)insurance undertakings and groups are required to provide FINMA with any information necessary to supervision, and publish, at least annually, a report on their solvency and financial condition. The requirements of Directive 2009/138/EC regarding public disclosure are satisfactorily addressed by the ISO, since the types of qualitative and quantitative information to be disclosed are in line with Directive 2009/138/EC. Under the ISO, (re)insurance undertakings and groups have to disclose their business activities, performance, risk management, risk profile, methods used for assessment regarding in particular provisions, capital management and solvency.

| (16) | Fifth, regarding professional secrecy and cooperation and exchange of information, the regime in force in Switzerland has professional secrecy obligations in place for all persons who work or have worked for FINMA, including auditors and experts acting on behalf of FINMA. Those obligations also stipulate that confidential information may not be divulged except in aggregate or summary form, without prejudice to cases covered by criminal law. Furthermore, FINMA will only use confidential information received from other supervisory authorities to perform its duties and for the purposes provided for by the law. The regime in force in Switzerland also requires that in case a (re)insurance undertaking is declared bankrupt or compulsorily wound up, confidential information may be disclosed if it does not concern third parties involved in rescuing that undertaking. FINMA may share confidential information received from another supervisory authority with authorities, bodies or persons covered by professional secrecy obligations in Switzerland only after the express agreement of that supervisory authority. It has signed Memoranda of Understanding with all Member States of the Union to coordinate international cooperation, in particular on exchange of confidential information. |
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(16)

Fifth, regarding professional secrecy and cooperation and exchange of information, the regime in force in Switzerland has professional secrecy obligations in place for all persons who work or have worked for FINMA, including auditors and experts acting on behalf of FINMA. Those obligations also stipulate that confidential information may not be divulged except in aggregate or summary form, without prejudice to cases covered by criminal law. Furthermore, FINMA will only use confidential information received from other supervisory authorities to perform its duties and for the purposes provided for by the law. The regime in force in Switzerland also requires that in case a (re)insurance undertaking is declared bankrupt or compulsorily wound up, confidential information may be disclosed if it does not concern third parties involved in rescuing that undertaking. FINMA may share confidential information received from another supervisory authority with authorities, bodies or persons covered by professional secrecy obligations in Switzerland only after the express agreement of that supervisory authority. It has signed Memoranda of Understanding with all Member States of the Union to coordinate international cooperation, in particular on exchange of confidential information.

| (17) | Sixth, regarding the impact of its decisions, FINMA and the other Swiss authorities which have the mandate to ensure the proper functioning of financial markets, such as the Swiss National Bank and the Ministry of Finance are equipped to appreciate how decisions will affect the stability of financial systems globally, in particular during emergency situations, and to take into account their potential procyclical effects where exceptional movements in the financial markets occur. Under the regime in force in Switzerland, regular meetings take place between the abovementioned authorities to exchange information on financial stability risks and coordinate action. The same takes place at international level, where Swiss authorities exchange for instance with the supervisory colleges of the Member States of the Union and EIOPA on financial stability matters. |
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(17)

Sixth, regarding the impact of its decisions, FINMA and the other Swiss authorities which have the mandate to ensure the proper functioning of financial markets, such as the Swiss National Bank and the Ministry of Finance are equipped to appreciate how decisions will affect the stability of financial systems globally, in particular during emergency situations, and to take into account their potential procyclical effects where exceptional movements in the financial markets occur. Under the regime in force in Switzerland, regular meetings take place between the abovementioned authorities to exchange information on financial stability risks and coordinate action. The same takes place at international level, where Swiss authorities exchange for instance with the supervisory colleges of the Member States of the Union and EIOPA on financial stability matters.

| (18) | Articles 378 and 380 of Delegated Regulation (EU) 2015/35 also set out specific criteria regarding equivalence for reinsurance activities and for group supervision. |
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(18)

Articles 378 and 380 of Delegated Regulation (EU) 2015/35 also set out specific criteria regarding equivalence for reinsurance activities and for group supervision.

| (19) | Regarding the specific criteria for reinsurance activities under Article 378 of Delegated Regulation (EU) 2015/35, the taking-up of business of reinsurance is subject to prior authorisation by FINMA conditional on detailed standards set in law. Reinsurance captive companies are covered by the solvency regime in force in Switzerland under the ISO. |
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(19)

Regarding the specific criteria for reinsurance activities under Article 378 of Delegated Regulation (EU) 2015/35, the taking-up of business of reinsurance is subject to prior authorisation by FINMA conditional on detailed standards set in law. Reinsurance captive companies are covered by the solvency regime in force in Switzerland under the ISO.

| (20) | Regarding the specific criteria for group supervision under Article 380 of Delegated Regulation (EU) 2015/35, FINMA has the power to determine which undertakings fall under the scope of supervision at group level and supervise insurance and reinsurance undertakings which are part of a group. FINMA supervises all (re)insurance undertakings over which a participating undertaking, as defined in Article 212(1)(a) of Directive 2009/138/EC, exercises a dominant or significant influence. |
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(20)

Regarding the specific criteria for group supervision under Article 380 of Delegated Regulation (EU) 2015/35, FINMA has the power to determine which undertakings fall under the scope of supervision at group level and supervise insurance and reinsurance undertakings which are part of a group. FINMA supervises all (re)insurance undertakings over which a participating undertaking, as defined in Article 212(1)(a) of Directive 2009/138/EC, exercises a dominant or significant influence.

| (21) | FINMA is capable of assessing the risk profile, financial position and solvency of (re)insurance undertakings that are part of a group and the business strategy of that group. |
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(21)

FINMA is capable of assessing the risk profile, financial position and solvency of (re)insurance undertakings that are part of a group and the business strategy of that group.

| (22) | Under the regime in force in Switzerland, reporting and accounting rules allow monitoring of intra-group transactions and risk concentrations, which (re)insurance groups must report at least on an annual basis. |
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(22)

Under the regime in force in Switzerland, reporting and accounting rules allow monitoring of intra-group transactions and risk concentrations, which (re)insurance groups must report at least on an annual basis.

| (23) | Under the regime in force in Switzerland, FINMA restricts the use of own funds of a (re)insurance undertaking if they cannot effectively be made available to cover the capital requirement of the participating undertaking for which group solvency is calculated. The calculation of group solvency leads to results at least equivalent to the results of the methods set in Articles 230 and 233 of Directive 2009/138/EC, without double counting of own funds and after eliminating the intra-group creation of capital through reciprocal financing. More in detail, even if there is no group solvency ratio as under Articles 230 and 233 of Directive 2009/138/EC but a series of solvency ratios per entity within a group, that series captures all interactions between entities of the group and is thus taking the group structure into account. |
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(23)

Under the regime in force in Switzerland, FINMA restricts the use of own funds of a (re)insurance undertaking if they cannot effectively be made available to cover the capital requirement of the participating undertaking for which group solvency is calculated. The calculation of group solvency leads to results at least equivalent to the results of the methods set in Articles 230 and 233 of Directive 2009/138/EC, without double counting of own funds and after eliminating the intra-group creation of capital through reciprocal financing. More in detail, even if there is no group solvency ratio as under Articles 230 and 233 of Directive 2009/138/EC but a series of solvency ratios per entity within a group, that series captures all interactions between entities of the group and is thus taking the group structure into account.

| (24) | Accordingly, as it fulfils all the criteria laid down in Articles 378, 379 and 380 of Delegated Regulation (EU) 2015/35, the regulatory and supervisory regime in force in Switzerland for (re)insurance undertakings and groups is considered to meet the criteria for full equivalence laid down in Articles 172(2), 227(4) and 260(3) of Directive 2009/138/EC. |
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(24)

Accordingly, as it fulfils all the criteria laid down in Articles 378, 379 and 380 of Delegated Regulation (EU) 2015/35, the regulatory and supervisory regime in force in Switzerland for (re)insurance undertakings and groups is considered to meet the criteria for full equivalence laid down in Articles 172(2), 227(4) and 260(3) of Directive 2009/138/EC.

| (25) | The Commission may undertake a specific review relating to an individual third country or territory at any time outside the general review, where relevant developments make it necessary for the Commission to re-assess the recognition granted by this decision. The Commission should continue to monitor, with the technical assistance of EIOPA, the evolution of the regime in force in Switzerland and the fulfilment of the conditions on the basis of which this Decision has been taken, |
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(25)

The Commission may undertake a specific review relating to an individual third country or territory at any time outside the general review, where relevant developments make it necessary for the Commission to re-assess the recognition granted by this decision. The Commission should continue to monitor, with the technical assistance of EIOPA, the evolution of the regime in force in Switzerland and the fulfilment of the conditions on the basis of which this Decision has been taken,

| (26) | Directive 2009/138/EC applies from 1 January 2016. This Decision should therefore also grant equivalence as of that date to the solvency and prudential regime in force in Switzerland, |
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(26)

Directive 2009/138/EC applies from 1 January 2016. This Decision should therefore also grant equivalence as of that date to the solvency and prudential regime in force in Switzerland,

HAS ADOPTED THIS DECISION:

Article 1

From 1 January 2016, the solvency regime in force in Switzerland that applies to the reinsurance activities of undertakings with their head office in Switzerland shall be considered equivalent to the requirements of Title I of Directive 2009/138/EC.

Article 2

From 1 January 2016, the solvency regime in force in Switzerland that applies to insurance and reinsurance undertakings with head offices in Switzerland shall be considered equivalent to the requirements of Chapter VI of Title I of Directive 2009/138/EC.

Article 3

From 1 January 2016, the prudential regime in force in Switzerland that applies to the supervision of insurance and reinsurance undertakings in a group shall be considered equivalent to the requirements of Title III of Directive 2009/138/EC.

Article 4

This Decision shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Done at Brussels, 5 June 2015.

For the Commission

The President

Jean-Claude JUNCKER

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(1)  
  OJ L 335, 17.12.2009, p. 1.

1

(2)  Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EC (OJ L 331, 15.12.2010, p. 48).

2

(3)  The ISO was adopted by the Swiss Federal Council on 25 March 2015 and enters into force on 1 July 2015.

3

(4)  Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ L 12, 17.1.2015, p. 1).

4

(5)  We specify in the current act whether we consider insurance undertakings at the individual (‘solo’) or group level. Solo undertakings may or may not be part of groups.

5

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