1998L0078 — EN — 11.02.2003 — 001.001 — 1
This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents
►B DIRECTIVE98/78/ECOFTHEEUROPEANPARLIAMENTANDOFTHECOUNCIL
of27October1998
onthesupplementarysupervisionofinsuranceundertakingsinaninsurancegroup
(OJ L 330, 5.12.1998, p. 1)
Amended by:
Official Journal
No page date
►M1Directive 2002/87/EC of the European Parliament and of the Council of
16 December 2002L 35 1 11.2.2003
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DIRECTIVE 98/78/EC OF THE EUROPEAN PARLIAMENT
ANDOFTHECOUNCIL
of27October 1998
on the supplementary supervision of insurance undertakings in an
insurancegroup
THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,
Having regard to the Treaty establishing the European Community, and
in particular Article 57(2) thereof,
Having regard to the proposal from the Commission (1),
Having regard to the opinion of the Economic and Social
Committee (2),
Acting in accordance withth e procedure laid down in Article 189b of
the Treaty (3),
(1)Whereas the first Council Directive 73/239/EEC of 24 July 1973on the coordination of laws, regulations and administrative
provisions relating to the taking up and pursuit of the business
of direct insurance other than life assurance (
4) and the first
Council Directive 79/267/EEC of 5 March1979 on th e coordina-tion of laws, regulations and administrative provisions relating tothe taking up and pursuit of the business of direct life assur-ance (
5) require insurance undertakings to have solvency
margins;
(2)Whereas, under Council Directive 92/49/EEC of 18 June 1992on the coordination of laws, regulations and administrative
provisions relating to direct insurance other than life assuranceand amending Directives 73/239/EEC and 88/357/EEC (
6) and
Council Directive 92/96/EEC of 10 November 1992 on the coor-dination of laws, regulations and administrative provisionsrelating to direct life assurance and amending Directives 79/
267/EEC and 90/619/EEC (
7) the taking up and the pursuit of
the business of insurance are subject to the granting of a singleofficial authorisation issued by the authorities of the MemberState in which an insurance undertaking has its registered office(home Member State); whereas such authorisation allows an
undertaking to carry on business throughout the Community,
under either the right of establishment or the freedom to provideservices; whereas the competent authorities of home MemberStates are responsible for monitoring the financial health ofinsurance undertakings, including their solvency;
(3)Whereas measures concerning the supplementary supervision ofinsurance undertakings in an insurance group should enable theauthorities supervising an insurance undertaking to form a more
soundly based judgment of its financial situation; whereas such
supplementary supervision should take into account certainundertakings which are not at present subject to supervisionunder Community Directives; whereas this Directive does not inany way imply that Member States are required to undertake
supervision of those undertakings considered individually;1998L0078 — EN — 11.02.2003 — 001.001 — 2
(1) OJ C 341, 19.12.1995, p. 16, and OJ C 108, 7.4.1998, p. 48.
(2) OJ C 174, 17.6.1996, p. 16.
(3) Opinion of the European Parliament of 23 October 1997 (OJ C 339,
10.11.1997, p. 136), Council common position of 30 March1998 (OJ C
204, 30.6.1998, p. 1), Decision of the European Parliament of 16 September
1998 (OJ C 313, 12.10.1998) and Council Decision of 13 October 1998.
(4) OJ L 228, 16.8.1973, p. 3. Directive as last amended by Directive 95/26/EC
(OJ L 168, 18.7.1995, p. 7).
(5) OJ L 63, 13.3.1979, p. 1. Directive as last amended by Directive 95/26/EC.
(6) OJ L 228, 11.8.1992, p. 1. Directive as amended by Directive 95/26/EC.
(7) OJ L 360, 9.12.1992, p. 1. Directive as amended by Directive 95/26/EC.
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(4)Whereas insurance undertakings in a common insurance market
engage in direct competition with each other and the rules
concerning capital requirements must therefore be equivalent;whereas, to that end, the criteria applied to determine supple-mentary supervision must not be left solely to the discretion ofMember States; whereas the adoption of common basic ruleswill be in the best interests of the Community in that it will
prevent distortions of competition; whereas it is necessary to
eliminate certain divergences between the laws of the MemberStates as regards the prudential rules to which insurance under-takings that are part of an insurance group are subject;
(5)Whereas the approach adopted consists in bringing about suchharmonisation as is essential, necessary and sufficient to achievethe mutual recognition of prudential control systems in this field;whereas the aim of this Directive is in particular to protect theinterests of insured persons;
(6)Whereas certain provisions of this Directive define minimumstandards; whereas a home Member State may lay down stricterrules for insurance undertakings authorised by its own competentauthorities;
(7)Whereas this Directive provides for the supplementary supervi-sion of any insurance company which is a participatingundertaking in at least one insurance undertaking, reinsuranceundertaking or non-member-country insurance undertaking and,under different rules, for the supplementary supervision of anyinsurance company whose parent undertaking is an insurance
holding company, a reinsurance undertaking, a non-member-
country insurance undertaking or a mixed-activity insuranceholding company; whereas the supervision of individual insur-ance undertakings by the competent authorities remains theessential principle of insurance supervision;
(8)Whereas it is necessary to calculate an adjusted solvency situa-tion for insurance undertakings forming part of an insurancegroup; whereas different methods are applied by the competentauthorities in the Community to take into account the effects onthe financial situation of an insurance undertaking attributable to
the fact that it belongs to an insurance group; whereas this
Directive lays down three methods to effect that calculation;whereas the principle is accepted that these methods are pruden-tially equivalent;
(9)Whereas the solvency of a related subsidiary insurance under-
taking of an insurance holding company, reinsurance
undertaking or non-member-country insurance undertaking maybe affected by the financial resources of the group of which itis a part and by the distribution of financial resources withinthat group; whereas the competent authorities should be provided
withth e means of exercising supplementary supervision and of
taking appropriate measures at the level of the insurance under-taking where its solvency is or may be jeopardised;
(10)Whereas the competent authorities should have access to all theinformation relevant to the exercise of supplementary supervi-
sion; whereas cooperation between the authorities responsible
for the supervision of insurance undertakings as well as betweenthose authorities and the authorities responsible for the supervi-sion of other financial sectors should be established;
(11)Whereas intra-group transactions can affect the financial positionof an insurance undertaking; whereas the competent authoritiesshould be in a position to exercise general supervision overcertain types of suchintra-group operations and take appropriatemeasures at the level of the insurance undertaking where itssolvency is or may be jeopardised,1998L0078 — EN — 11.02.2003 — 001.001 — 3
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HAVE ADOPTED THIS DIRECTIVE:
Article 1
Definitions
For the purposes of this Directive:
(a)insurance undertaking means an undertaking which has received
official authorisation in accordance with Article 6 of Directive 73/
239/EEC or Article 6 of Directive 79/267/EEC;
(b)non-member-country insurance undertaking means an undertaking
which would require authorisation in accordance with Article 6 ofDirective 73/239/EEC or Article 6 of Directive 79/267/EEC if ithad its registered office in the Community;
(c)reinsurance undertaking means an undertaking, other than an insur-
ance undertaking or a non-member-country insurance undertaking,
the main business of which consists in accepting risks ceded by an
insurance undertaking, a non-member-country insurance under-taking or other reinsurance undertakings;
(d)parent undertaking means a parent undertaking within the meaning
of Article 1 of Directive 83/349/EEC (
1) and any undertaking
which, in the opinion of the competent authorities, effectively exer-
cises a dominant influence over another undertaking;
(e)subsidiary undertaking means a subsidiary undertaking within the
meaning of Article 1 of Directive 83/349/EEC and any undertakingover which, in the opinion of the competent authorities, a parentundertaking effectively exercises a dominant influence. All subsidi-aries of subsidiary undertakings shall also be consideredsubsidiaries of the parent undertaking which is at the head of those
undertakings;
(f)participation means participation within the meaning of Article 17,
first sentence, of Directive 78/660/EEC (
2) or the holding, directly
or indirectly, of 20 % or more of the voting rights or capital of anundertaking;
(g)participating undertaking shall mean an undertaking which is either
a parent undertaking or other undertaking which holds a participa-tion, or an undertaking linked withanoth er undertaking by arelationship within the meaning of Article 12(1) of Directive 83/
349/EEC;
(h)related undertaking shall mean either a subsidiary or other under-
taking in which a participation is held, or an undertaking linkedwith another undertaking by a relationship within the meaning ofArticle 12(1) of Directive 83/349/EEC;
(i)insurance holding company shall mean a parent undertaking, the
main business of which is to acquire and hold participations insubsidiary undertakings, where those subsidiary undertakings are
exclusively or mainly insurance undertakings, reinsurance under-
takings, or non-member-country insurance undertakings, at leastone of suchsubsidiary undertakings being an insurance under-taking, and which is not a mixed financial holding companywithin the meaning of Directive 2002/87/EC of the European
Parliament and of the Council of 16 December 2002 on the supple-
mentary supervision of credit institutions, insurance undertakingsand investment firms in a financial conglomerate (
3);1998L0078 — EN — 11.02.2003 — 001.001 — 4
(1) SeventhCouncil Directive 83/349/EEC of 13 June 1983 based on Article
54(3)(g) of the Treaty on consolidated accounts (OJ L 193, 18.7.1983, p.
1). Directive as last amended by the 1994 Act of Accession.
(2) FourthCouncil Directive 78/660/EEC of 25 July 1978 based on Article
54(3)(g) of the Treaty on the annual accounts of certain types of companies
(OJ L 222, 14.8.1978, p. 11). Directive as last amended by the 1994 Act of
Accession.
(3) OJ L 35, 11.2.2003.▼M1
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(j)mixed-activity insurance holding company shall mean a parent
undertaking, other than an insurance undertaking, a non-membercountry insurance undertaking, a reinsurance undertaking, an insur-
ance holding company or a mixed financial holding company
within the meaning of Directive 2002/87/EC, which includes atleast one insurance undertaking among its subsidiary undertakings;
(k)competent authorities means the national authorities which are
empowered by law or regulation to supervise insurance undertak-ings.
Article 2
Cases of application of supplementary supervision of insurance
undertakings
1. In addition to the provisions of Directives 73/239/EEC and 79/
267/EEC which lay down the rules for the supervision of insurance
undertakings, Member States shall provide supervision of any insuranceundertaking which is a participating undertaking in at least one insur-ance undertaking, reinsurance undertaking, or non-member-countryinsurance undertaking shall be supplemented in the manner prescribedin Articles 5, 6, 8 and 9.
2. Every insurance undertaking the parent undertaking of which is
an insurance holding company, a reinsurance undertaking or a non-member-country insurance undertaking shall be subject to supplemen-tary supervision in the manner prescribed in Articles 5(2), 6, 8 and 10.
3. Every insurance undertaking the parent undertaking of which is a
mixed-activity insurance holding company shall be subject to supple-
mentary supervision in the manner prescribed in Articles 5(2), 6 and 8.
Article 3
Scopeofsupplementarysupervision
1. The exercise of supplementary supervision in accordance with
Article 2 shall in no way imply that the competent authorities arerequired to play a supervisory role in relation to the non-member-country insurance undertaking, insurance holding company or mixed-activity insurance holding company or reinsurance undertaking takenindividually.
2. The supplementary supervision shall take into account:
— related undertakings of the insurance undertaking,
— participating undertakings in the insurance undertaking,— related undertakings of a participating undertaking in the insurance
undertaking,
referred to in Articles 5, 6, 8, 9 and 10.3. Member States may decide not to take into account in the supple-
mentary supervision referred to in Article 2 undertakings having theirregistered office in a non-member country where there are legal impe-
diments to the transfer of the necessary information, without prejudice
to the provisions of Annex I, point 2.5, and of Annex II, point 4.
Furthermore, the competent authorities responsible for exercising
supplementary supervision may in the cases listed below decide on acase-by-case basis not to take an undertaking into account in thesupplementary supervision referred to in Article 2:
— if the undertaking which should be included is of negligible interest
with respect to the objectives of the supplementary supervision ofinsurance undertakings,
— if the inclusion of the financial situation of the undertaking would
be inappropriate or misleading with respect to the objectives of thesupplementary supervision of insurance undertakings.1998L0078 — EN — 11.02.2003 — 001.001 — 5
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Article 4
Competentauthoritiesforexercising supplementarysupervision
1. Supplementary supervision shall be exercised by the competent
authorities of the Member State in which the insurance undertaking
has received official authorisation under Article 6 of Directive 73/239/
EEC or Article 6 of Directive 79/267/EEC.
2. Where insurance undertakings authorised in two or more Member
States have as their parent undertaking the same insurance holdingcompany, reinsurance undertaking, non-member-country insuranceundertaking or mixed-activity insurance holding company, the compe-
tent authorities of the Member States concerned may reach agreement
as to which of them will be responsible for exercising supplementarysupervision.
3. Where a Member State has more than one competent authority
for the prudential supervision of insurance undertakings and reinsur-ance undertakings, such Member State shall take the requisite
measures to organise coordination between those authorities.
Article 5
Availabilityandqualityofinformation
1. Member States shall prescribe that the competent authorities shall
require that every insurance undertaking subject to supplementarysupervision shall have adequate internal control mechanisms in placefor the production of any data and information relevant for thepurposes of suchsupplementary supervision.
2. Member States shall take the appropriate steps to ensure that
there are no legal impediments within their jurisdiction preventing theundertakings that are subject to the supplementary supervision and theirrelated undertakings and participating undertakings from exchangingamong themselves any information relevant for the purposes of suchsupplementary supervision.
Article 6
Accesstoinformation
1. Member States shall provide that their competent authorities
responsible for exercising supplementary supervision shall have accessto any information which would be relevant for the purpose of super-vision of an insurance undertaking subject to suchsupplementarysupervision. The competent authorities may address themselves directlyto the relevant undertakings referred to in Article 3(2) to obtain the
necessary information only if suchinformation h as been requested
from the insurance undertaking and has not been supplied by it.
2. Member States shall provide that their competent authorities may
carry out within their territory, themselves or through the intermediaryof persons whom they appoint for that purpose, on-the-spot verificationof the information referred to in paragraph 1 at:
— the insurance undertaking subject to supplementary supervision,
— subsidiary undertakings of that insurance undertaking,— parent undertakings of that insurance undertaking,— subsidiary undertakings of a parent undertaking of that insurance
undertaking.
3. Where, in applying this Article, the competent authorities of one
Member State wishin specific cases to verify important informationconcerning an undertaking situated in another Member State which isa related insurance undertaking, a subsidiary undertaking, a parent
undertaking or a subsidiary of a parent undertaking of the insurance
undertaking subject to supplementary supervision, they must ask thecompetent authorities of that other Member State to have that verifica-tion carried out. The authorities which receive such a request must acton it within the limits of their jurisdiction by carrying out the verifica-tion themselves, by allowing the authorities making the request to carry1998L0078 — EN — 11.02.2003 — 001.001 — 6
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it out or by allowing an auditor or expert to carry it out. ►M1The
competent authority which made the request may, if it so wishes, parti-cipate in the verification when it does not carry out the verification
itself.◄
Article 7
Cooperationbetweencompetentauthorities
1. Where insurance undertakings established in different Member
States are directly or indirectly related or have a common participatingundertaking, the competent authorities of each Member State shallcommunicate to one another on request all relevant information which
may allow or facilitate the exercise of supervision pursuant to this
Directive and shall communicate on their own initiative any informa-tion which appears to them to be essential for the other competentauthorities.
2. Where an insurance undertaking and either a credit institution as
defined in Directive 77/780/EEC (
1) or an investment firm as defined in
Directive 93/22/EEC (2), or both, are directly or indirectly related or
have a common participating undertaking, the competent authorities
and the authorities with public responsibility for the supervision ofthose other undertakings shall cooperate closely. Without prejudice totheir respective responsibilities, those authorities shall provide oneanother with any information likely to simplify their task, in particularwithin the framework of this Directive.
3. Information received pursuant to this Directive and, in particular,
any exchange of information between competent authorities which is
provided for in this Directive shall be subject to the obligation of
professional secrecy defined in Article 16 of Directive 92/49/EEC andArticle 15 of Directive 92/96/EEC.
Article 8
Intra-grouptransactions
1. Member States shall provide that the competent authorities exer-
cise general supervision over transactions between:
(a) an insurance undertaking and:
(i) a related undertaking of the insurance undertaking;
(ii) a participating undertaking in the insurance undertaking;
(iii) a related undertaking of a participating undertaking in the
insurance undertaking;
(b) an insurance undertaking and a natural person who holds a partici-
pation in:
(i) the insurance undertaking or any of its related undertakings;
(ii) a participating undertaking in the insurance undertaking;
(iii) a related undertaking of a participating undertaking in the
insurance undertaking.
These transactions concern in particular:
— loans,
— guarantees and off-balance-sheet transactions,
— elements eligible for the solvency margin,
— investments,
— reinsurance operations,1998L0078 — EN — 11.02.2003 — 001.001 — 7
(1) First Council Directive 77/780/EEC of 12 December 1977 on the coordina-
tion of the laws, regulations and administrative provisions relating to the
taking up and pursuit of the business of credit institutions (OJ L 322,17.12.1977, p. 30). Directive as last amended by Directive 96/13/EC (OJ L
66, 16.3.1996, p. 15).
(
2) Council Directive 93/22/EEC of 10 May 1993 on investment services in the
securities field (OJ L 141, 11.6.1993, p. 27). Directive as last amended by
Directive 97/9/EC (OJ L 84, 26.3.1997, p. 22).
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— agreements to share costs.
2.►M1Member States shall require insurance undertakings to
have in place adequate risk management processes and internal controlmechanisms, including sound reporting and accounting procedures, inorder to identify, measure, monitor and control transactions as provided
for in paragraph1 appropriately. Member States sh all also require at
least annual reporting by insurance undertakings to the competentauthorities of significant transactions. These processes and mechanismsshall be subject to overview by the competent authorities. ◄
If, on the basis of this information, it appears that the solvency of the
insurance undertaking is, or may be, jeopardised, the competentauthority shall take appropriate measures at the level of the insuranceundertaking.
Article 9
Adjustedsolvencyrequirement
1. In the case referred to in Article 2(1), Member States shall require
that an adjusted solvency calculation be carried out in accordance withAnnex I.
2. Any related undertaking, participating undertaking or related
undertaking of a participating undertaking shall be included in thecalculation referred to in paragraph1.
3. If the calculation referred to in paragraph 1 demonstrates that the
adjusted solvency is negative, the competent authorities shall takeappropriate measures at the level of the insurance undertaking in ques-tion.
Article 10
Reinsurance undertakings, insurance holding companies and non-
member-countryinsuranceundertakings
1. In the case referred to in Article 2(2), Member States shall require
the method of supplementary supervision to be applied in accordancewithAnnex II.
2. In the case referred to in Article 2(2), the calculation shall include
all related undertakings of the insurance holding company, the reinsur-ance undertaking or the non-member-country insurance undertaking, inthe manner provided for in Annex II.
3. If, on the basis of this calculation, the competent authorities
conclude that the solvency of a subsidiary insurance undertaking of
the insurance holding company, the reinsurance undertaking or the
non-member-country insurance undertaking is, or may be, jeopardised,they shall take appropriate measures at the level of that insuranceundertaking.
Article 10a
Cooperationwiththirdcountries'competentauthorities
1. The Commission may submit proposals to the Council, either at
the request of a Member State or on its own initiative, for the negotia-
tion of agreements with one or more third countries regarding the
means of exercising supplementary supervision over:
(a) insurance undertakings which have, as participating undertakings,
undertakings within the meaning of Article 2 which have theirhead office situated in a third country; and
(b) non-member country insurance undertakings which have, as partici-
pating undertakings, undertakings within the meaning of Article 2which have their head office in the Community.1998L0078 — EN — 11.02.2003 — 001.001 — 8
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2. The agreements referred to in paragraph 1 shall in particular seek
to ensure both:
(a) that the competent authorities of the Member States are able to
obtain the information necessary for the supplementary supervision
of insurance undertakings which have their head office in theCommunity and which have subsidiaries or hold participations inundertakings outside the Community; and
(b) that the competent authorities of third countries are able to obtain
the information necessary for the supplementary supervision of
insurance undertakings which have their head office in their terri-tories and which have subsidiaries or hold participations inundertakings in one or more Member States.
3. The Commission and the Insurance Committee shall examine the
outcome of the negotiations referred to in paragraph 1 and the resulting
situation.
Article 10b
The Member States shall require that persons who effectively direct the
business of an insurance holding company are of sufficiently good
repute and have sufficient experience to perform these duties.
Article 11
Implementation
1. Member States shall adopt not later than 5 June 2000 the laws,
regulations and administrative provisions necessary to comply withthis Directive. They shall immediately inform the Commission thereof.
2. Member States shall provide that the provisions referred to in
paragraph 1 shall first apply to the supervision of accounts for financial
years beginning on 1 January 2001 or during that calendar year.
3. When Member States adopt the measures referred to in paragraph
1, they shall contain a reference to this Directive or shall be accompa-nied by such reference on the occasion of their official publication. Themethods of making such reference shall be laid down by MemberStates.
4. Member States shall communicate to the Commission the main
provisions of national law which they adopt in the field covered by
this Directive.
5. Not later than 1 January 2006 the Commission shall submit to the
Insurance Committee a report on the application of this Directive and,if necessary, on the need for further harmonisation.
Article 12
Entryintoforce
This Directive shall enter into force on the day of its publication in the
Official Journal of the European Communities .
Article 13
Addressees
This Directive is addressed to the Member States.1998L0078 — EN — 11.02.2003 — 001.001 — 9
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ANNEX I
CALCULATION OF THE ADJUSTED SOLVENCY OF INSURANCE
UNDERTAKINGS
1. CHOICE OF CALCULATION METHOD AND GENERAL PRINCIPLES
A. Member States shall provide that the calculation of the adjusted
solvency of insurance undertakings referred to in Article 2(1) shall be
carried out according to one of the methods described in point 3. A
Member State may, however, provide for the competent authorities to
authorise or impose the application of a method set out in point 3 other
than that chosen by the Member State.
B.Proportionality
The calculation of the adjusted solvency of an insurance undertaking
shall take account of the proportional share held by the participating
undertaking in its related undertakings.
‘Proportional share’ means either, where method 1 or method 2
described in point 3 is used, the proportion of the subscribed capital
that is held, directly or indirectly, by the participating undertaking or,
where method 3 described in point 3 is used, the percentages used for
the establishment of the consolidated accounts.
However, whichever method is used, when the related undertaking is a
subsidiary undertaking and has a solvency deficit, the total solvency
deficit of the subsidiary has to be taken into account.
However, where, in the opinion of the competent authorities, the
responsibility of the parent undertaking owning a share of the capital
is limited strictly and unambiguously to that share of the capital, such
competent authorities may give permission for the solvency deficit of
the subsidiary undertaking to be taken into account on a proportional
basis.
Where there are no capital ties between some of the undertakings in an
insurance group, the competent authority shall determine which propor-
tional share will have to be taken account of.
C.Eliminationofdoubleuseofsolvencymarginelements
C.1.General treatment of solvency margin elements
Regardless of the method used for the calculation of the adjusted
solvency of an insurance undertaking, the double use of elements
eligible for the solvency margin among the different insurance under-
takings taken into account in that calculation must be eliminated.
For this purpose, when calculating the adjusted solvency of an insurance
undertaking and where the methods described in point 3 do not provide
for it, the following amounts shall be eliminated:
— the value of any asset of that insurance undertaking which repre-
sents the financing of elements eligible for the solvency margin of
one of its related insurance undertakings,
— the value of any asset of a related insurance undertaking of that
insurance undertaking which represents the financing of elements
eligible for the solvency margin of that insurance undertaking,
— the value of any asset of a related insurance undertaking of that
insurance undertaking which represents the financing of elements
eligible for the solvency margin of any other related insurance
undertaking of that insurance undertaking.
C.2.Treatment of certain elements
Without prejudice to the provisions of section C.1:
— profit reserves and future profits arising in a related life assurance
undertaking of the insurance undertaking for which the adjusted
solvency is calculated, and
— any subscribed but not paid-up capital of a related insurance under-
taking of the insurance undertaking for which the adjusted solvency
is calculated,1998L0078 — EN — 11.02.2003 — 001.001 — 10
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may only be included in the calculation in so far as they are eligible for
covering the solvency margin requirement of that related undertaking.
However, any subscribed but not paid-up capital which represents a
potential obligation on the part of the participating undertaking shall
be entirely excluded from the calculation.
Any subscribed but not paid-up capital of the participating insurance
undertaking which represents a potential obligation on the part of a
related insurance undertaking shall also be excluded from the calcula-
tion.
Any subscribed but not paid-up capital of a related insurance under-
taking which represents a potential obligation on the part of another
related insurance undertaking of the same participating insurance under-
taking shall be excluded from the calculation.
C.3.Transferability
If the competent authorities consider that certain elements eligible for
the solvency margin of a related insurance undertaking other than those
referred to in section C.2 cannot effectively be made available to cover
the solvency margin requirement of the participating insurance under-
taking for which the adjusted solvency is calculated, those elements
may be included in the calculation only in so far as they are eligible
for covering the solvency margin requirement of the related under-
taking.
C.4. The sum of the elements referred to in sections C.2 and C.3 may not
exceed the solvency margin requirement of the related insurance under-
taking.
D.Eliminationoftheintra-groupcreationofcapital
When calculating adjusted solvency, no account shall be taken of any
element eligible for the solvency margin arising out of reciprocal finan-
cing between the insurance undertaking and:
— a related undertaking,
— a participating undertaking,— another related undertaking of any of its participating undertakings.
Furthermore, no account shall be taken of any element eligible for the
solvency margin of a related insurance undertaking of the insurance
undertaking for which the adjusted solvency is calculated when the
element in question arises out of reciprocal financing withany oth er
related undertaking of that insurance undertaking.
In particular, reciprocal financing exists when an insurance undertaking,
or any of its related undertakings, holds shares in, or makes loans to,
another undertaking which, directly or indirectly, holds an element
eligible for the solvency margin of the first undertaking.
E. The competent authorities shall ensure that the adjusted solvency is
calculated with the same frequency as that laid down by Directives 73/
239/EEC and 79/267/EEC for calculating the solvency margin of insur-
ance undertakings. The value of the assets and liabilities shall be
assessed according to the relevant provisions of Directives 73/239/
EEC, 79/267/EEC and 91/674/EEC (
1).
2. APPLICATION OF THE CALCULATION METHODS2.1.Relatedinsuranceundertakings
The adjusted solvency calculation shall be carried out in accordance with
the general principles and methods set out in this Annex.
In the case of all methods, where the insurance undertaking has more than
one related insurance undertaking, the adjusted solvency calculation shall
be carried out by integrating eachof th ese related insurance undertakings.
In cases of successive participations (for example, where an insurance
undertaking is a participating undertaking in another insurance undertaking
which is also a participating undertaking in an insurance undertaking), the
adjusted solvency calculation shall be carried out at the level of each parti-
cipating insurance undertaking which has at least one related insurance
undertaking.1998L0078 — EN — 11.02.2003 — 001.001 — 11
(1) Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and
consolidated accounts of insurance undertakings (OJ L 374, 31.12.1991, p. 7).
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Member States may waive calculation of the adjusted solvency of an insur-
ance undertaking:
— if the undertaking is a related undertaking of another insurance under-
taking authorised in the same Member State, and that related
undertaking is taken into account in the calculation of the adjusted
solvency of the participating insurance undertaking, or
— if the insurance undertaking is a related undertaking either of an insur-
ance holding company or of a reinsurance undertaking which has its
registered office in the same Member State as the insurance under-
taking, and both the holding insurance company or the reinsurance
undertaking and the related insurance undertaking are taken into
account in the calculation carried out.
Member States may also waive calculation of the adjusted solvency of an
insurance undertaking if it is a related insurance undertaking of another
insurance undertaking, a reinsurance undertaking or an insurance holding
company which has its registered office in another Member State, and if
the competent authorities of the Member States concerned have agreed to
grant exercise of the supplementary supervision to the competent authority
of the latter Member State.
In each case, the waiver may be granted only if the competent authorities
are satisfied that the elements eligible for the solvency margins of the
insurance undertakings included in the calculation are adequately distrib-
uted between those undertakings.
Member States may provide that where the related insurance undertaking
has its registered office in a Member State other than that of the insurance
undertaking for which the adjusted solvency calculation is carried out, the
calculation shall take account, in respect of the related undertaking, of the
solvency situation as assessed by the competent authorities of that other
Member State.
2.2.Relatedreinsuranceundertakings
When calculating the adjusted solvency of an insurance undertaking which
is a participating undertaking in a reinsurance undertaking, this related rein-
surance undertaking shall be treated, solely for the purposes of the
calculation, by analogy witha related insurance undertaking, applying th e
general principles and methods described in this Annex.
To this end, a notional solvency requirement shall be established for each
related reinsurance undertaking on the basis of the same rules as are laid
down in Article 16(2) to (5) of Directive 73/239/EEC or Article 19 of
Directive 79/267/EEC. However, in the event of significant difficulty in
applying these rules, the competent authorities may permit the notional
life solvency requirement to be calculated on the basis of the first result
as set out in Article 16(3) of Directive 73/239/EEC. The same elements as
are found in Article 16(1) of Directive 73/239/EEC and in Article 18 of
Directive 79/267/EEC shall be recognised as eligible for the notional
solvency margin. The value of the assets and liabilities shall be assessed
according to the same rules as are laid down in those Directives and in
Directive 91/674/EEC.
2.3.Intermediateinsuranceholdingcompanies
When calculating the adjusted solvency of an insurance undertaking which
holds a participation in an insurance undertaking, a related reinsurance
undertaking, or an insurance undertaking in a non-member country through
an insurance holding company, the situation of the intermediate insurance
holding company is taken into account. For the sole purpose of this calcu-
lation, to be undertaken in accordance withth e general principles and
methods described in this Annex, this insurance holding company shall be
treated as if it were an insurance undertaking subject to a zero solvency
requirement and were subject to the same conditions as are laid down in
Article 16(1) of Directive 73/239/EEC or in Article 18 of Directive 79/267/EEC in respect of elements eligible for the solvency margin.
2.4.Related insurance or reinsurance undertakingshaving their registered
officeinnon-membercountries
A.Related non-member country insurance undertakings
When calculating the adjusted solvency of an insurance undertaking
which is a participating undertaking in a non-member-country insurance
undertaking, the latter shall be treated solely for the purposes of the
calculation, by analogy witha related insurance undertaking, by
applying the general principles and methods described in this Annex.1998L0078 — EN — 11.02.2003 — 001.001 — 12
▼B
However, where the non-member-country in which that undertaking has
its registered office makes it subject to authorisation and imposes on it
a solvency requirement at least comparable to that laid down in Direc-
tives 73/239/EEC or 79/267/EEC, taking into account the elements of
cover of that requirement, Member States may provide that the calcula-
tion shall take into account, as regards that undertaking, the solvency
requirement and the elements eligible to satisfy that requirement as
laid down by the non-member country in question.
B.Related non-member-country reinsurance undertakings
Notwithstanding section 2.2, when calculating the adjusted solvency of
an insurance undertaking which is a participating undertaking in a rein-
surance undertaking withits registered office in a non-member country,
and subject to the same conditions as those set out in point A above,
Member States may provide that the calculation shall take account, as
regards the latter undertaking, of the own-funds requirement and the
elements eligible to satisfy that requirement as laid down by the non-
member country in question. Where only the insurance undertakings of
that non-member country are subject to such provisions, the notional
own-funds requirement on the related reinsurance undertaking and the
elements eligible to satisfy that notional requirement may be calculated
as if the undertaking in question were a related insurance undertaking
of that non-member country.
2.4a.Relatedcreditinstitutions,investmentfirmsandfinancialinstitutions
When calculating the adjusted solvency of an insurance undertaking which
is a participating undertaking in a credit institution, investment firm or
financial institution, the rules laid down in Article 16(1) of Directive 73/
239/EEC and in Article 18 of Directive 79/267/EEC on the deduction of
suchparticipations sh all apply mutatis mutandis , as well as the provisions
on the ability of Member States under certain conditions to allow alterna-
tive methods and to allow such participations not to be deducted.
2.5.Non-availabilityofthenecessaryinformation
Where information necessary for calculating the adjusted solvency of an
insurance undertaking, concerning a related undertaking withits registered
office in a Member State or a non-member country, is not available to the
competent authorities, for whatever reason, the book value of that under-
taking in the participating insurance undertaking shall be deducted from
the elements eligible for the adjusted solvency margin. In that case, the
unrealised gains connected withsuchparticipation sh all not be allowed as
an element eligible for the adjusted solvency margin.
3. CALCULATION METHODS
Method 1:Deductionandaggregationmethod
The adjusted solvency situation of the participating insurance undertaking is
the difference between:
(i) the sum of:
(a) the elements eligible for the solvency margin of the participating
insurance undertaking, and
b) the proportional share of the participating insurance undertaking in
the elements eligible for the solvency margin of the related insurance
undertaking
and
(ii) the sum of:
(a) the book value in the participating insurance undertaking of the
related insurance undertaking, and
(b) the solvency requirement of the participating insurance undertaking,
and
(c) the proportional share of the solvency requirement of the related
insurance undertaking.
Where the participation in the related insurance undertaking consists, wholly
or in part, of an indirect ownership, then item (ii)(a) shall incorporate the
value of such indirect ownership, taking into account the relevant successive
interests; and items (i)(b) and (ii)(c) shall include the corresponding propor-
tional shares of the elements eligible for the solvency margin of the related
insurance undertaking and of the solvency requirement of the related insur-
ance undertaking, respectively.1998L0078 — EN — 11.02.2003 — 001.001 — 13
▼M1
▼B
▼B
Method 2:Requirementdeductionmethod
The adjusted solvency of the participating insurance undertaking is the differ-
ence between:
(i) the sum of the elements eligible for the solvency margin of the partici-
pating insurance undertaking
and
(ii) the sum of:
(a) the solvency requirement of the participating insurance undertaking,
and
(b) the proportional share of the solvency requirement of the related
insurance undertaking.
When valuing the elements eligible for the solvency margin, participations
within the meaning of this Directive are valued by the equity method, in
accordance withth e option set out in Article 59(2)(b) of Directive 78/660/
EEC.
Method 3:Accountingconsolidation-basedmethod
The calculation of the adjusted solvency of the participating insurance under-
taking shall be carried out on the basis of the consolidated accounts. The
adjusted solvency of the participating insurance undertaking is the difference
between:
the elements eligible for the solvency margin calculated on the basis of
consolidated data, and
(a) either the sum of the solvency requirement of the participating insurance
undertaking and of the proportional shares of the solvency requirements
of the related insurance undertakings, based on the percentages used for
the establishment of the consolidated accounts,
(b) or the solvency requirement calculated on the basis of consolidated data.
The provisions of Directives 73/239/EEC, 79/267/EEC and 91/674/EEC shall
apply for the calculation of the elements eligible for the solvency margin and
of the solvency requirement based on consolidated data.1998L0078 — EN — 11.02.2003 — 001.001 — 14
▼B
ANNEX II
SUPPLEMENTARY SUPERVISION FOR INSURANCE UNDERTAK-
INGS THAT ARE SUBSIDIARIES OF AN INSURANCE HOLDING
COMPANY, A REINSURANCEUNDERTAKINGOR A NON-MEMBER-
COUNTRYINSURANCEUNDERTAKING
1. In the case of two or more insurance undertakings referred to in Article 2(2)
which are the subsidiaries of an insurance holding company, a reinsurance
undertaking or a non-member-country insurance undertaking and which areestablished in different Member States, the competent authorities shall ensure
that the method described in this Annex is applied in a consistent manner.
The competent authorities shall exercise the supplementary supervision with
the same frequency as that laid down by Directives 73/239/EEC and 79/267/
EEC for calculating the solvency margin of insurance undertakings.
2. Member States may waive the calculation provided for in this Annex with
regard to an insurance undertaking:
— if that insurance undertaking is a related undertaking of another insurance
undertaking and if it is taken into account in the calculation provided for
in this Annex carried out for that other undertaking,
— if that insurance undertaking and one or more other insurance undertak-
ings authorised in the same Member State have as their parent
undertaking the same insurance holding company, reinsurance under-
taking or non-member-country insurance undertaking, and the insurance
undertaking is taken into account in the calculation provided for in this
Annex carried out for one of these other undertakings,
— if that insurance undertaking and one or more other insurance undertak-
ings authorised in other Member States have as their parent undertaking
the same insurance holding company, reinsurance undertaking or non-
member-country insurance undertaking, and an agreement granting exer-
cise of the supplementary supervision covered by this Annex to the
supervisory authority of another Member State has been concluded in
accordance withArticle 4(2).
In the case of successive participations (for example: an insurance holding
company or a reinsurance undertaking which is itself owned by another
insurance holding company, a reinsurance undertaking or a non-member-
country insurance undertaking), Member States may apply the calculations
provided for in this Annex only at the level of the ultimate parent under-
taking of the insurance undertaking which is an insurance holding company,
a reinsurance undertaking or a non-member-country insurance undertaking.
3. The competent authorities shall ensure that calculations analogous to those
described in Annex I are carried out at the level of the insurance holding
company, reinsurance undertaking or non-member-country insurance under-
taking.
The analogy shall consist in applying the general principles and methods
described in Annex I at the level of the insurance holding company, reinsur-
ance undertaking or non-member-country insurance undertaking.
For the sole purpose of this calculation, the parent undertaking shall be
treated as if it were an insurance undertaking subject to:
— a zero solvency requirement where it is an insurance holding company,
— a notional solvency requirement as provided for in section 2.2 of Annex I
where it is a reinsurance undertaking, or as provided for in section 2.4(B)
of Annex I where it is a reinsurance undertaking with its registered office
in a non-member country,
— a solvency requirement determined according to the principles of section
2.4(A) of Annex I, where it is a non-member-country insurance under-
taking,
and is subject to the same conditions as laid down in Article 16(1) of Direc-
tive 73/239/EEC or in Article 18 of Directive 79/267/EEC as regards the
elements eligible for the solvency margin.
4.Non-availabilityofthenecessaryinformation
Where information necessary for the calculation provided for in this Annex,
concerning a related undertaking withits registered office in a Member State
or a non-member country, is not available to the competent authorities, for
whatever reason, the book value of that undertaking in the participating
undertaking shall be deducted from the elements eligible for the calculation
provided for in this Annex. In that case, the unrealised gains connected with1998L0078 — EN — 11.02.2003 — 001.001 — 15
▼B
such participation shall not be allowed as an element eligible for the calcula-
tion.1998L0078 — EN — 11.02.2003 — 001.001 — 16