The Solvency ii
Directive
SECTION 3 - OWN FUNDS
SUBSECTION 1 - DETERMINATION OF OWN
FUNDS
Article 86
Own funds
Own funds shall
comprise the sum of basic own funds, referred to in Article 87 and
ancillary own funds referred to in Article 88.
Article 87
Basic own funds
Basic own funds shall consist of the following items:
(1)
the excess of assets over liabilities, valued in accordance with
Article 74 and Section 2;
(2) subordinated liabilities.
The excess amount referred to in point (1) shall be reduced by
the amount of own shares held by the insurance or reinsurance
undertaking.
Article 88
Ancillary own funds
1. Ancillary own funds shall
consist of items other than basic own funds which can be called up
to absorb losses.
Ancillary own funds may comprise the
following items to the extent that they are not basic own fund
items:
(a) unpaid share capital or initial fund that has not
been called up;
(b) letters of credit and guarantees;
(c) any other legally binding commitments received by insurance and
reinsurance undertakings.
In the case of a mutual or
mutual-type association with variable contributions, ancillary own
funds may also comprise any future claims which that association may
have against its members by way of a call for supplementary
contribution, within the next twelve months.
2. Where an
ancillary own fund item has been paid in or called up, it shall be
treated as an asset and cease to form part of ancillary own fund
items.
Article 89
Supervisory
approval of ancillary own funds
1. The amounts of
ancillary own fund items to be taken into account when determining
own funds shall be subject to prior supervisory approval.
2.
The amount ascribed to each ancillary own fund item shall reflect
the loss-absorbency of the item and shall be based upon prudent and
realistic assumptions. Where an ancillary own fund item has a fixed
nominal value, the amount of that item shall be equal to its nominal
value, where it appropriately reflects its loss-absorbency.
3. ---
4. Supervisory authorities shall approve either of the
following:
(a) a monetary amount for each ancillary own fund
item;
(b) a method to determine the amount of each ancillary
own fund item, in which case supervisory approval of the amount
determined in accordance with that method shall be granted for a
specified period of time.
4a. For each ancillary own fund
item, supervisory authorities shall base their approval on an
assessment of the following:
(a) the status of the
counterparties concerned, in relation to their ability and
willingness to pay;
(b) the recoverability of the funds,
taking account of the legal form of the item, as well as any
conditions which would prevent the item from being successfully paid
in or called up;
(c) any information on the outcome of past
calls which insurance and reinsurance undertakings have made for
such ancillary own funds, to the extent that information can be
reliably used to assess the expected outcome of future calls.
Article 90
Surplus funds
1. Surplus funds shall be deemed to be accumulated profits which
have not been made available for distribution to policyholders and
beneficiaries.
2. In so far as authorised under national
law, surplus funds shall not be considered as insurance and
reinsurance liabilities to the extent that they fulfil the criteria
set out in Article 94(1).
Article
91 ---
Article 92
Implementing measures
1.
The Commission shall adopt implementing measures specifying the
following:
(a) the criteria for granting supervisory approval
in accordance with Article 89;
(b) the treatment of
participations, within the meaning of the third subparagraph of
Article 210(2), in financial and credit institutions with respect to
the determination of own funds.
Those measures designed to
amend non-essential elements of this Directive, by supplementing it,
shall be adopted in accordance with the regulatory procedure with
scrutiny referred to in Article 304(3).
2. Participations in
financial and credit institutions as referred to in point (b) of
paragraph 1 shall comprise the following:
(a) participations
which insurance and reinsurance undertakings hold in:
(i)
credit institutions and financial institutions within the meaning of
Article 4(1) and (5) of Directive 2006/48/EC,
(ii) investment
firms within the meaning of point 1 of Article 4(1) of Directive
2004/39/EC;
(b) subordinated claims and instruments referred
to in Article 63 and Article 64(3) of Directive 2006/48/EC which
insurance and reinsurance undertakings hold in respect of the
entities defined in point (a) of this paragraph in which they hold a
participation.
SUBSECTION 2 -
CLASSIFICATION OF OWN FUNDS
Article 93
Characteristics and
features used to classify own funds into tiers
1. Own
fund items shall be classified into three tiers.
The classification
of those items shall depend upon whether they are basic own fund or
ancillary own fund items and the extent to which they possess the
following characteristics:
(a) the item is available, or can
be called up on demand, to fully absorb losses on a going-concern
basis, as well as in the case of winding-up (permanent
availability);
(b) in the case of winding-up, the total
amount of the item is available to absorb losses and the repayment
of the item is refused to its holder until all other obligations,
including insurance and reinsurance obligations towards
policyholders and beneficiaries of insurance and reinsurance
contracts, have been met (subordination).
2. When assessing
the extent to which own fund items possess the characteristics set
out in points (a) and (b) of paragraph 1, currently and in the
future, due consideration shall be given to the duration of the
item, in particular whether the item is dated or not. Where an own
fund item is dated, the relative duration of the item as compared to
the duration of the insurance and reinsurance obligations of the
undertaking shall be considered (sufficient duration).
In
addition, the following features shall be considered:
(a)
whether the item is free from requirements or incentives to redeem
the nominal sum (absence of incentives to redeem);
(b)
whether the item is free from mandatory fixed charges (absence of
mandatory servicing costs);
(c) whether the item is clear of
encumbrances (absence of encumbrances).
Article 94
Main criteria for the
classification into tiers
1. Basic own fund items
shall be classified in Tier 1 where they substantially possess the
characteristics set out in points (a) and (b) of Article 93(1),
taking into consideration the features set out in Article 93(2).
2. Basic own fund items shall be classified in Tier 2 where they
substantially possess the characteristic set out in point (b) of
Article 93(1), taking into consideration the features set out in
Article 93(2).
Ancillary own fund items shall be classified
in Tier 2 where they substantially possess the characteristics set
out in points (a) and (b) of Article 93(1), taking into
consideration the features set out in Article 93(2).
3. Any
basic and ancillary own fund items which do not fall under
paragraphs 1 and 2 shall be classified in Tier 3.
Article 95
Classification of own funds
into tiers
Member States shall ensure that insurance
and reinsurance undertakings classify their own fund items on the
basis of the criteria laid down in Article 94.
For that
purpose, insurance and reinsurance undertakings shall refer to the
list of own funds referred to in point (c) of Article 97(1), where
applicable.
Where an own fund item is not covered by that
list, it shall be assessed and classified by insurance and
reinsurance undertakings, in accordance with the first paragraph.
This classification shall be subject to approval by the supervisory
authority.
Article 96
Classification of specific insurance own fund items
Without prejudice to Article 95 and point (c) of Article 97(1) for
the purposes of this Directive the following classifications shall
be applied:
(1) surplus funds falling under Article 90(2)
shall be classified in Tier 1;
(2) letters of credit and
guarantees which are held in trust for the benefit of insurance
creditors by an independent trustee and provided by credit
institutions authorised in accordance with Directive 2006/48/EC
shall be classified in Tier 2;
(3) any future claims which
mutual or mutual-type associations of shipowners with variable
contributions solely insuring risks listed in classes 6, 12 and 17
in point A of Annex I may have against their members by way of a
call for supplementary contributions, within the next twelve months,
shall be classified in Tier 2.
In accordance with
subparagraph 2 of Article 94(2), any future claims which mutual or
mutual-type associations with variable contributions may have
against their members by way of a call for supplementary
contributions, within the next twelve months, not falling under
point 3 of subparagraph 1 shall be classified in Tier 2 where they
substantially possess the characteristics set out in points (a) and
(b) of Article 93(1), taking into consideration the features set out
in Article 93(2).
Article 97
Implementing measures
1. The Commission shall adopt
implementing measures laying down the following:
(a) (b) ---
(c) a list of own fund items, including those referred to in
Article 96, deemed to meet the criteria, set out in Article 94,
which contains for each own fund item a precise description of the
features which determined its classification;
(d) the methods
to be used by supervisory authorities, when approving the assessment
and classification of own fund items which are not covered by the
list referred to in point (c).
Those measures designed to
amend non-essential elements of this Directive, by supplementing it,
shall be adopted in accordance with the regulatory procedure with
scrutiny referred to in Article 304(3).
2. The Commission
shall regularly review and, where appropriate, update the list
referred to in point (c) of paragraph 1 in the light of market
developments.
SUBSECTION 3 -
ELIGIBILITY OF OWN FUNDS
Article 98
Eligibility and limits
applicable to Tier 1, Tier 2 and Tier 3
1. As far as
the compliance with the Solvency Capital Requirement is concerned,
the eligible amounts of Tier 2 and Tier 3 items shall be subject to
quantitative limits. Those limits shall be such as to ensure that at
least the following conditions are met:
(a) the proportion of
Tier 1 items in the eligible own funds is higher than one third of
the total amount of eligible own funds;
(b) the eligible
amount of Tier 3 items is less than one third of the total amount of
eligible own funds.
2. As far as the compliance with the
Minimum Capital Requirement is concerned, the amount of basic own
fund items eligible to cover the Minimum Capital Requirement which
are classified in Tier 2 shall be subject to quantitative limits.
Those limits shall be such as to ensure,
as a minimum, that the proportion of Tier 1 items in the eligible
basic own funds is higher than one half of the total amount of
eligible basic own funds.
3. ---
4. The eligible
amount of own funds to cover the Solvency Capital Requirement set
out in Article 100 shall be equal to the sum of the amount of Tier
1, the eligible amount of Tier 2 and the eligible amount of Tier 3.
5. The eligible amount of basic own funds to cover the Minimum
Capital Requirement set out in Article 126 shall be equal to sum of
the amount of Tier 1 and the eligible amount of basic own fund items
classified in Tier 2.
Article 99
Implementing measures
The Commission shall adopt
implementing measures laying down:
(a) the quantitative
limits referred to in paragraphs 1 and 2 of Article 98;
(b)
the adjustments that should be made to reflect the lack of
transferability of those own funds items that can only be used to
cover losses arising from a particular segment of liabilities or
from particular risks (ring-fenced funds).
Those measures
designed to amend non-essential elements of this Directive, by
supplementing it, shall be adopted in accordance with the regulatory
procedure with scrutiny referred to in Article 304(3).
  
Return to Index
Solvency ii Introduction (1) to (10)
Solvency ii Introduction (11) to (20)
Solvency ii Introduction (21) to (30)
Solvency ii Introduction (31) to (40)
Solvency ii Introduction (41) to (50)
Solvency ii Introduction (51) to (60)
Solvency ii Introduction (61) to (70)
Solvency ii Introduction (71) to (80)
Solvency ii Introduction (81) to (95)
Solvency ii Articles 1 to 10
Solvency ii Articles 11 to 20
Solvency ii Articles 21 to 30
Solvency ii Articles 31 to 39
Solvency ii Articles 40 to 49
Solvency ii Articles 50 to 62
Solvency ii Articles 63 to 71
Solvency ii Articles 72 to 85
Solvency ii Articles 86 to 99
Solvency ii Articles 100 to 125
Solvency ii Articles 126 to 142
Solvency ii Articles 143 to 159
Solvency ii Articles 160 to 173
Solvency ii Articles 174 to 203
Solvency ii Articles 204 to 215
Solvency ii Articles 216 to 233
Solvency ii Articles 234 to
262
Solvency ii Articles 263 to 298
Solvency ii Articles 300 to 313
Solvency ii ANNEX 1 to 3
Solvency ii ANNEX 4 to 5
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