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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