The Solvency ii
Directive
(21)
In order to guarantee transparency
insurance and reinsurance undertakings should publicly disclose
at least annually essential information on their solvency and
financial condition.
Undertakings should be allowed to
publicly disclose additional
information on a voluntary basis.
To publicly disclose
information means to make it available to the public either in
printed or electronic form free of charge.
(22) Provision
should be made for exchanges of
information between the supervisory authorities and
authorities or bodies which, by virtue of their function, help
to strengthen the stability of the financial system.
It
is therefore necessary to specify the conditions under which
those exchanges of information should be possible.
Moreover, where information may be disclosed only with the
express agreement of the supervisory authorities, those
authorities should be enabled, where appropriate, to make their
agreement subject to compliance with strict conditions.
(23) It is necessary to promote
supervisory convergence not only in respect of
supervisory tools but also in respect of supervisory practices.
The Committee of European Insurance and Occupational
Pensions Supervisors (CEIOPS) established by Commission Decision
2004/6/EC of 5 November 2003 should play an important role in
this respect and report regularly to the European Parliament and
the Commission on the progress made.
(23a) The objective
of the information and report to be presented in relation to
capital add-ons by the CEIOPS is not to inhibit their use as
permitted under this Directive but to contribute to an ever
higher degree of supervisory convergence in the use of capital
add-ons between supervisory authorities in the different Member
States.
(24) In order to limit
the administrative burden and avoid duplication of tasks,
supervisory authorities and national statistical authorities
should cooperate and exchange information.
(25) For the
purposes of strengthening the supervision of insurance and
reinsurance undertakings and the protection of policyholders,
the statutory auditors within the meaning of Directive
2006/43/EC of the European Parliament and of the Council of 17
May 2006 on statutory audits of annual accounts and consolidated
accounts should have a duty to report promptly, any facts which
are likely to have a serious effect on the financial situation
or the administrative organisation of an insurance or a
reinsurance undertaking.
(26) Insurance undertakings
pursuing both life and non-life activities
should manage those activities
separately, in order to protect the interests of life
policyholders.
In particular, those undertakings should
be subject to the same capital requirements as those applicable
to an equivalent insurance group, made up of a life insurance
undertaking and a non-life undertaking, taking into account the
increased transferability of capital in the case of composite
insurance undertakings.
(27) The assessment of the
financial position of insurance and reinsurance undertakings
should rely on sound economic principles and make optimal use of
the information provided by financial markets, as well as
generally available data on insurance technical risks.
In particular, solvency requirements should be based on an
economic valuation of the whole balance-sheet.
(28)
Valuation standards for supervisory
purposes should be compatible with international accounting
developments, to the extent possible, so as to limit the
administrative burden on insurance or reinsurance undertakings.
(29) In accordance with that approach, capital
requirements should be covered by own funds whether, on or off
the balance-sheet items.
Since all financial resources
do not provide full absorption of losses in the case of
winding-up and on a going-concern basis, own fund items should
be classified in accordance with quality criteria into three
tiers, and the eligible amount of own funds to cover capital
requirements should be limited accordingly.
The limits
applicable to own fund items should only apply to determine the
solvency standing of insurance and reinsurance undertakings, and
should not further restrict the freedom of those undertakings
with respect to their internal capital management.
(29a)
Generally, assets which are free from any foreseeable
liabilities are available to absorb losses due to adverse
business fluctuations, both on a going-concern basis as well as
in the case of winding-up.
Therefore the vast majority
of the excess of assets over liabilities, as valued in
accordance with the principles set out in this Directive, should
be treated as high quality capital (Tier 1).
(29b) Not
all assets within an undertaking are unrestricted.
In
some Member States, specific products origin some ring-fenced
fund structures which give one class of policyholders greater
rights to assets within their own "fund".
Although
these assets are included in computing the excess of assets over
liabilities for own-funds purposes they cannot in fact be made
available to meet the risks outside the ring-fenced fund.
To be consistent with the economic approach,
the assessment of own-funds needs to
be adjusted to reflect the different nature of assets, which
form part of a ring-fenced arrangement.
Similarly, the Solvency Capital Requirement calculation should
reflect the reduction in pooling/diversification related to
those ring-fenced funds.
(29c) It is current practice in
certain Member States that insurance companies sell life
insurance products in relation to which the policy holders and
beneficiaries contribute to the risk capital of the company in
exchange for all or part of the return on the contributions.
Those accumulated profits are surplus funds, which are the
property of the legal entity in which they are generated.
(29d) Surplus funds should
be valued in line with the economic approach laid down in this
Directive.
In this respect, a mere reference to the
evaluation of surplus funds in the statutory annual accounts
should not be sufficient.
In line with the requirements
on own funds, surplus funds should be subject to the criteria
laid down in this Directive on the classification in tiers.
This means, inter alia, that only surplus funds which
fulfil the requirements for classification in Tier 1 should be
considered as Tier 1 capital.
(29e)
Mutual and mutual-type associations
with variable contributions may call for supplementary
contributions from their members in order to increase the amount
of financial resources that they hold to absorb losses.
Those contributions (supplementary members' calls) may represent
a significant source of funding for mutual and mutual-type
associations, including when those associations are confronted
with adverse business fluctuations.
Therefore those
contributions should be recognised as ancillary own fund items
and treated accordingly for solvency purposes.
In
particular, in the case of mutual or mutual-type associations of
ship owners with variable contributions solely insuring maritime
risks, the recourse to supplementary members' calls has been a
long-established practice, subject to specific recovery
arrangements, and the approved amount of those members' calls
should be treated as good quality capital (Tier 2).
Similarly, in the case of other mutual and mutual-type
associations where supplementary members' calls are of similar
quality, the approved amount of those members' calls should also
be treated as good quality capital (Tier 2).
(30) In
order to allow insurance and reinsurance undertakings to meet
their commitments towards policyholders and beneficiaries,
Member States should require those undertakings
to establish adequate technical provisions.
The
principles and actuarial and statistical methodologies
underlying the calculation of those technical provisions should
be harmonised throughout the Community in order to achieve
better comparability and transparency.
 
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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