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) Text with EEA relevance

Article 327c

Combination of key functions

• (a) the supervisory authority concludes, on the basis of the supervisory review process, that the undertaking:
• (i) is able to withstand any current or future risks;
• (ii) is not subject to on-going supervisory measures to remedy material non-compliance with Directive 2009/138/EC;

• (b) the supervisory authority concludes that the undertaking does not have a complex business model, taking into account its business strategy its business plan, the complexity of the insurance products offered and its investment portfolio;

• (c) the undertaking meets all of the following conditions, subject to paragraphs 2, 3 and 4:
• (i) the technical provisions from life activities, gross of the amounts recoverable from reinsurance contracts and special purpose vehicles, as referred to in Article 76 of Directive 2009/138/EC, are not higher than EUR 12 000 000 000 ;
• (ii) the annual gross written premium income from non-life activities is not higher than EUR 2 000 000 000 ;
• (iii) the undertaking does not represent more than 5 % of the life market or non-life market of the home Member State of the undertaking, where the life market share is based on gross technical provisions and the non-life market share is based on gross written premiums;

• (d) the supervisory authority has not identified unresolved material concerns arising from the system of governance of the undertaking;

• (e) the persons responsible for the key functions of risk management, actuarial and compliance possess at all times sufficient knowledge, skills and experience to perform their duties, and the combination of functions or the combination of a function with a membership of the administrative, management or supervisory body does not compromise the person’s ability and availability to carry out her or his responsibilities;

- (f) the supervisory authority is satisfied that the cost of maintaining separate functions would be disproportionate for the undertaking.

The supervisory authority shall withdraw the approval granted to an insurance or reinsurance undertaking that is not classified as small and non-complex undertaking to use the proportionality measure provided for in Article 41(2a) of Directive 2009/138/EC, where any of the conditions set out in the first subparagraph are no longer fulfilled.

Article 327d

Reduction of the frequency of the review of written policies

• (a) the supervisory authority concludes, on the basis of the supervisory review process, that the undertaking:
• (i) is able to withstand any current or future risks;
• (ii) does not require a more frequent supervisory assessment than the one requested by the insurance or reinsurance undertaking;
• (iii) is not subject to on-going supervisory measures to remedy material non-compliance with Directive 2009/138/EC;

• (b) the supervisory authority concludes that the undertaking does not have a complex business model, taking into account its business strategy, its business plan, the complexity of the insurance products offered and its investment portfolio;

• (c) the undertaking meets all of the following conditions, subject to paragraphs 2, 3 and 4:
• (i) the technical provisions from life activities, gross of the amounts recoverable from reinsurance contracts and special purpose vehicles, as referred to in Article 76 of Directive 2009/138/EC, are not higher than EUR 12 000 000 000 ;
• (ii) the annual gross written premium income from non-life activities is not higher than EUR 2 000 000 000 ;
• (iii) the undertaking does not represent more than 5 % of the life market or non-life market of the home Member State of the undertaking, where the life market share is based on gross technical provisions and the non-life market share is based on gross written premiums;

• (d) the supervisory authority has not identified unresolved material concerns arising from the system of governance of the undertaking.

The supervisory authority shall withdraw the approval granted to an insurance or reinsurance undertaking that is not classified as small and non-complex undertaking to use the proportionality measure provided for in Article 41(3) of Directive 2009/138/EC, where any of the conditions set out in the first subparagraph are no longer fulfilled.

4. Notwithstanding paragraph 1, first subparagraph, supervisory authorities may still approve the use of the proportionality measure provided for in Article 41(3), second subparagraph of Directive 2009/138/EC to an insurance and reinsurance undertaking which does not meet the condition set out in paragraph 1, first subparagraph, point (c), of this Article, where they conclude, on the basis of the elements of the supervisory review process that are relevant for this proportionality measure, that the risk profile of the undertaking is sufficiently low.

Article 327e

Reduction of the frequency of the own risk and solvency assessment

• (a) the supervisory authority concludes, on the basis of the supervisory review process, that the undertaking:
• (i) is able to withstand any current or future risks;
• (ii) does not require a more frequent supervisory assessment than the one requested by the insurance or reinsurance undertaking;
• (iii) is not subject to on-going supervisory measures to remedy material non-compliance with Directive 2009/138/EC;

• (b) the supervisory authority concludes that the undertaking does not have a complex business model, taking into account its business strategy, its business plan, the complexity of the insurance products offered and its investments portfolio;

• (c) the undertaking meets all of the following conditions, subject to paragraphs 2, 3 and 4:
• (i) the technical provisions from life activities, gross of the amounts recoverable from reinsurance contracts and special purpose vehicles, as referred to in Article 76 of Directive 2009/138/EC, are not higher than EUR 12 000 000 000 ;
• (ii) the annual gross written premium income from non-life activities is not higher than EUR 2 000 000 000 ;
• (iii) the undertaking does not represent more than 5 % of the life market or non-life market of the home Member State of the undertaking, where the life market share is based on gross technical provisions and the non-life market share is based on gross written premiums;

• (d) the supervisory authority has not identified unresolved material concerns arising from the system of governance of the undertaking;

• (e) the undertaking’s Solvency Capital Requirement is exceeded by an appropriate margin taking into account the internal target solvency position of the undertaking as specified in its medium-term capital management plan;

• (f) the supervisory authority is satisfied with the information provided in the undertaking’s last own risk and solvency assessment pursuant to Article 45(2) of Directive 2009/138/EC and Article 306 of this Regulation, taking into account its risk profile;

• (g) the undertaking is able to demonstrate to the satisfaction of the supervisory authority that the reduced frequency of the own risk and solvency assessment report would not negatively affect the risk management system of the undertaking referred to Article 44 of Directive 2009/138/EC;

• (h) the undertaking maintains an effective process to monitor circumstances that require an ad hoc own risk and solvency assessment report and has sufficient resources to draw up such ad hoc report, when required.

The supervisory authority shall withdraw the approval granted to an insurance or reinsurance undertaking that is not classified as small and non-complex undertaking to use the proportionality measure provided for in Article 45(5), second subparagraph, of Directive 2009/138/EC, where any of the conditions set out in the first subparagraph are no longer fulfilled.

2. Paragraph 1, first subparagraph, point (c)(i), shall only apply to life undertakings and to undertakings pursuing both life and non-life activities whose technical provisions related to the life activities represent 20 % or more of the total technical provisions gross of the amounts recoverable from reinsurance contracts and special purpose vehicles, as referred to in Article 76 of Directive 2009/138/EC.

Article 327f

Use of the prudent deterministic valuation of the best estimate for life obligations with options and guarantees that are deemed immaterial

• (a) the supervisory authority concludes, on the basis of the supervisory review process, that the undertaking:
• (i) is able to withstand any current or future risks;
• (ii) is not subject to on-going supervisory measures to remedy material non-compliance with Directive 2009/138/EC;

• (b) the supervisory authority concludes that the undertaking does not have a complex business model, taking into account its business strategy, its business plan, the complexity of the insurance products offered and its investment portfolio;

• (c) the undertaking meets all of the following conditions, subject to paragraphs 2 and 3:
• (i) the technical provisions from life activities, gross of the amounts recoverable from reinsurance contracts and special purpose vehicles, as referred to in Article 76 of Directive 2009/138/EC, are not higher than EUR 12 000 000 000 ;
• (ii) the undertaking does not represent more than 5 % of the life market or non-life market of the home Member State of the undertaking, where the life market share is based on gross technical provisions and the non-life market share is based on gross written premiums;

• (d) the supervisory authority has not identified unresolved material concerns arising from the system of governance of the undertaking;

• (e) the undertaking is able to demonstrate that the use a prudent deterministic valuation is proportionate in relation to the nature, scale and complexity of the risks arising from the obligations for which the undertaking seeks to apply that valuation;

• (f) the time value of options and guarantees, measured based on the prudent harmonised reduced set of scenarios, of the contracts where the prudent deterministic valuation is applied represent less than 5 % of the Solvency Capital Requirement.

Where an insurance or reinsurance undertaking is granted the approval referred to in the first subparagraph, Article 34a(2) and (3), shall apply.

The supervisory authority shall withdraw the approval granted to an insurance or reinsurance undertaking that is not classified as small and non-complex undertaking to use the proportionality measure provided for in Article 77(8) of Directive 2009/138/EC, where any of the conditions set out in the first subparagraph are no longer fulfilled during at least one year.

2. Paragraph 1, first subparagraph, point (c)(i), shall only apply to life undertakings and to undertakings pursuing both life and non-life activities whose technical provisions related to the life activities represent 20 % or more of the total technical provisions gross of the amounts recoverable from reinsurance contracts and special purpose vehicles, as referred to in Article 76 of Directive 2009/138/EC.

3. Notwithstanding paragraph 1, first subparagraph, supervisory authorities may still approve the use of the proportionality measure provided for in Article 77(8) of Directive 2009/138/EC to an insurance and reinsurance undertaking which does not meet the condition set out in point (c) of that paragraph, where they conclude, on the basis of the elements of the supervisory review process that are relevant for this proportionality measure, that the risk profile of the undertaking is sufficiently low.

Article 327g

Waiver from liquidity risk management plan covering liquidity analysis over the short term

• (a) the supervisory authority concludes, on the basis of the supervisory review process, that the undertaking:
• (i) is able to withstand any current or future risks;
• (ii) is not subject to on-going supervisory measures to remedy material non-compliance with Directive 2009/138/EC;

• (b) the supervisory authority concludes that the undertaking does not have a complex business model, taking into account its business strategy, its business plan, the complexity of the insurance products offered and its investment portfolio;

• (c) the undertaking meets all of the following conditions, subject to paragraphs 2, 3 and 4:
• (i) the technical provisions from life activities, gross of the amounts recoverable from reinsurance contracts and special purpose vehicles, as referred to in Article 76 of Directive 2009/138/EC, are not higher than EUR 12 000 000 000 ;
• (ii) the annual gross written premium income from non-life activities is not higher than EUR 2 000 000 000 ;
• (iii) the undertaking does not represent more than 5 % of the life market or non-life market of the home Member State of the undertaking, where the life market share is based on gross technical provisions and the non-life market share is based on gross written premiums;

• (d) the undertaking’s Solvency Capital Requirement is exceeded by an appropriate margin taking into account the internal target solvency position of the undertaking as specified in its medium-term capital management plan;

• (e) the supervisory authority has not identified unresolved material concerns arising from the system of governance of the undertaking;

• (f) the undertaking is not exposed to material liquidity risk from both the asset and liability sides of the balance sheet, taking into account:
• (i) the availability of liquid assets and other liquidity sources;
• (ii) the level of liquidity of insurance contracts;
• (iii) the liquidity needs arising from insurable events;
• (iv) the potential impact of policy holders’ behaviour on the liquidity position of the undertaking;
• (v) the exposure to off-balance sheet items;
• (vi) the concentration of counterparty exposures to reinsurance undertakings
• (vii) where the undertaking is part of a group, the fungibility, availability and transferability of liquid assets across the group;

• (g) the supervisory authority has not identified material concerns about the liquidity position of the undertaking stemming from economic or macroeconomic market trend or the amount and quality of own funds items.

The supervisory authority shall withdraw the approval granted to an insurance or reinsurance undertaking that is not classified as small and non-complex undertaking to use the proportionality measure provided for in Article 144a(4) of Directive 2009/138/EC, where any of the conditions set out in the first subparagraph are no longer fulfilled.

3. Paragraph 1, first subparagraph, point (c)(ii), shall only apply to non-life undertakings and to undertakings pursuing both life and non-life activities whose annual gross written premium income related to the non-life activities represent 40 % or more of its total annual gross written premium income.

TITLE II **INSURANCE GROUPS**

CHAPTER I **SOLVENCY CALCULATION AT GROUP LEVEL**

SECTION 1 Group solvency: choice of calculation method and general principles

Article 328

Choice of method

• (a) whether the amount and quality of information available in relation to a related undertaking would not be sufficient for it to be subject to method 1;

- (b) whether a related undertaking is not covered by a group internal model, in the cases where a group internal model, approved in accordance with Article 231 of Directive 2009/138/EC, is used for the calculation of the consolidated group Solvency Capital Requirement;

• (c) whether, for the purposes of paragraph (b), the risks that are not captured in the group internal model are immaterial in relation to the overall risk profile of the group;

• (ca) whether, for the purposes of point (b), the group indicates in accordance with Article 343(5), point (a)(iii), that it intends to apply the integration technique 1 referred to in Annex XVIII, Section B, to the related undertaking which is not included in the scope of the internal model;

• (d) whether the use of method 1 in relation to a related undertaking or several related undertakings would be overly burdensome and the nature, scale and complexity of the risks of the group are such that the use of method 2 in relation to that related undertaking or those related undertakings does not materially affect the results of the group solvency calculation;

• (e) whether intra-group transactions are not significant both in terms of volume and value of the transaction;

• (f) where the group includes third country related insurance or reinsurance undertakings, whether delegated acts have been adopted pursuant to paragraphs 4 or 5 of Article 227 of Directive 2009/138/EC, determining that the solvency regimes of those third countries are equivalent or provisionally equivalent.

Article 329

Treatment of specific related undertakings

For the purposes of Article 235 of Directive 2009/138/EC, where the parent insurance holding company or mixed financial holding company has issued subordinated debt or has other eligible own funds subject to the limits set out in Article 98 of that Directive, Article 226(2) of that Directive shall apply.

• (a) the special purpose vehicle complies with the requirements set out in Article 211 of Directive 2009/138/EC, or where applicable with the Member State law in accordance with Article 211(3) of that Directive;

• (b) the special purpose vehicle is regulated by a third country supervisory authority, and complies with requirements equivalent to those set out in Article 211(2) of Directive 2009/138/EC.

For the purposes of this paragraph, Article 211 of Directive 2009/138/EC shall apply at the level of the group.

Article 330

Availability at group level of the eligible own funds of related undertakings

• (a) whether the own-fund item is subject to legal or regulatory requirements that restrict the ability of that item to absorb all types of losses wherever they arise in the group;

• (b) whether there are legal or regulatory requirements that restrict the transferability of assets to another insurance or reinsurance undertaking;

• (c) whether making those own funds available for covering the group Solvency Capital Requirement would not be possible within a maximum of 9 months.

In the assessment referred to in the first paragraph, the supervisory authorities shall also take into account any costs to the participating insurance or reinsurance undertaking or insurance holding company or mixed financial holding company, or to any related undertaking, that making such own funds available for the group is likely to entail.

• (a) ancillary own funds;

• (b) preference shares, subordinated mutual members account and subordinated liabilities;

- (c) an amount equal to the value of net deferred tax assets;

- (d) items referred to in Article 222(2) of Directive 2009/138/EC.

For the purposes of point (c) of the first subparagraph, the amount of deferred tax asset may be reduced by the amount of the associated deferred tax liability provided that those deferred tax assets and associated deferred tax liabilities both arise from the tax law of one Member State or third country and the taxation authority of that Member State or third country permits such offsetting.

Where the participating undertaking can demonstrate to the satisfaction of the group supervisor that the assumption referred to in points (a), (b) and (c) of the first subparagraph for one of the items is inappropriate in the specific circumstances of the group, the participating undertaking may include that item in the own funds available to cover the group Solvency Capital Requirement.

• (a) any minority interest in a subsidiary exceeding the contribution of that subsidiary to the group Solvency Capital Requirement, where the subsidiary is an insurance or reinsurance undertaking, a third country insurance or reinsurance undertaking, an insurance holding company or a mixed financial holding company;

• (b) any minority interest in a subsidiary ancillary services undertaking;

• (c) any restricted own funds item in ring-fenced funds as referred to in point (b) of Article 99 of Directive 2009/138/EC and in Article 80 of this Regulation.

4a. The amount of minority interest in a subsidiary exceeding the contribution of that subsidiary to the group solvency as referred to in paragraph 4, point (a), shall be calculated by multiplying the amount referred to in point (a) of this paragraph by the factor referred to in point (b) of this paragraph:

• (a) the difference between the total eligible own funds of the subsidiary net of intragroup subordinated debt and ancillary own funds, and the higher of the following:
• (i) the contribution of the subsidiary undertaking to the group Solvency Capital Requirement referred to in paragraph 6;
• (ii) the total amount of non-available own fund items other than those referred to in paragraph 4 from the subsidiary undertaking, net of intragroup subordinated debt and ancillary own funds;

• (b) the difference between 1 and the proportion of the subscribed capital that is held, directly or indirectly, by the parent undertaking belonging to the group for which the group solvency is calculated.

- (a) where the consolidated group Solvency Capital Requirement is calculated, in relation to that related undertaking, on the basis of the standard formula, the proportional share of the Solvency Capital Requirement of that related undertaking multiplied by a percentage corresponding to the proportion that the diversified component of the consolidated group Solvency Capital Requirement, as laid down in Article 336 (a), bears to the sum of the Solvency Capital Requirements of each of the undertakings included in the calculation of that diversified component of the consolidated group Solvency Capital Requirement;

• (b) where the consolidated group Solvency Capital Requirement is calculated, in relation to that related undertaking, on the basis of an internal model, the Solvency Capital Requirement of that related undertaking multiplied by a percentage corresponding to the proportion of the diversification effects at group level that are attributed to that related undertaking, determined by that internal model, provided that the sum of such percentages for all the related insurance and reinsurance undertakings, insurance holding companies or mixed financial holding companies included in the consolidated calculation based on the internal model equals 100 %.

The percentage referred to in the first subparagraph, point (a), shall not exceed 100 %.

SECTION 2 Group solvency: calculation methods

Article 331

Classification of own-fund items of insurance and reinsurance undertakings at group level

• (a) the undertaking concerned complies with Articles 71, 73 and 77 of this Regulation;

• (b) the own-fund item is clear of encumbrances, including within the meaning of Article 222(6) of Directive 2009/138/EC, and is not connected with any other transaction, which when considered with the own-fund item could result in that own-fund item not satisfying the requirements set out in Article 94 of that Directive at group level.

- (a) the term ‘Solvency Capital Requirement’ in Articles 71, 73 and 77 of this Regulation shall mean both the Solvency Capital Requirement of the undertaking that has issued the own-fund item and the group Solvency Capital Requirement;

• (b) the term ‘Minimum Capital Requirement’ in Articles 71, 73 and 77 of this Regulation shall mean both the Minimum Capital Requirement of the undertaking that has issued the own-fund item and one of the following minimums:
• (i) where method 1 is used, the minimum for the group Solvency Capital Requirement as calculated in accordance with the second subparagraph of Article 230(2) of Directive 2009/138/EC,
• (ii) where a combination of methods 1 and 2 is used, the minimum determined in accordance with Article 341 of this Regulation.

The first subparagraph shall only apply where the group has been subject to group supervision for at least three years, and the participating insurance or reinsurance undertaking, the insurance holding company or mixed financial holding company demonstrates in the own-risk and solvency assessment that it will be able to comply with its group Solvency Capital Requirement without such own-fund items, once the related undertaking has been part of the group for more than two financial years.

Article 332

Classification of own-fund items of third-country insurance and reinsurance undertakings at group level

• (a) the undertaking concerned complies with Articles 71, 73 and 77 of this Regulation;

• (b) the own-fund item is clear of encumbrances, including within the meaning of Article 222(6) of Directive 2009/138/EC, and is not connected with any other transaction, which when considered with the own-fund item, could result in that own-fund item not satisfying the requirements set out in Article 94 of that Directive at group level.

2. For the purposes of point (a) of paragraph 1:

• (a) the term ‘Solvency Capital Requirement’ in Articles 71, 73 and 77 of this Regulation shall mean the group Solvency Capital Requirement;

• (b) the term ‘Minimum Capital Requirement’ in Articles 71, 73 and 77 of this Regulation shall mean both the capital requirement, as laid down by the third country supervisory authority concerned, of the undertaking which has issued the own-fund item and one of the following minimums:
• (i) where method 1 is used, the minimum for the group Solvency Capital Requirement as calculated in accordance with the second subparagraph of Article 230(2) of Directive 2009/138/EC;
• (ii) where a combination of methods 1 and 2 is used, the minimum determined in accordance with Article 341 of this Regulation.

The first subparagraph shall only apply where the group has been subject to group supervision for at least three years, and the participating insurance or reinsurance undertaking, the insurance holding company or mixed financial holding company demonstrates in the own-risk and solvency assessment that it will be able to comply with its group Solvency Capital Requirement, without such own-fund items, once the related undertaking has been part of the group for more than two financial years.

Article 333

Classification of own-fund items of insurance holding companies, mixed financial holding companies, and subsidiary ancillary services undertakings at group level

• (a) undertakings comply with the requirements set out in Articles 71, 73 and 77 of this Regulation;

• (b) the own-fund item is clear of encumbrances, including within the meaning of Article 222(6) of Directive 2009/138/EC, and is not connected with any other transaction, which when considered with the own-fund item, could result in that own-fund item not satisfying the requirements set out in Article 94 of that Directive at group level.

• (a) the term ‘Solvency Capital Requirement’ in Articles 71, 73 and 77 of this Regulation shall mean the group Solvency Capital Requirement;

• (b) the term ‘Minimum Capital Requirement’ in Articles 71, 73 and 77 of this Regulation includes both non-compliance with the relevant minimum referred to in Article 331(2)(b) and the insolvency of the insurance holding company, intermediate insurance holding company, mixed financial holding company, intermediate mixed financial holding company or subsidiary ancillary services undertaking.

The first subparagraph shall only apply where the group has been subject to group supervision for at least three years, and the participating insurance or reinsurance undertaking, the insurance holding company or mixed financial holding company demonstrates in the own-risk and solvency assessment that it will be able to comply with its group Solvency Capital Requirement without such own-fund items once the related undertaking has been part of the group for more than two financial years.

Article 334

Classification of own-fund items of residual related undertakings

Article 335

Determination of consolidated data

• (a) full consolidation of data of all the insurance or reinsurance undertakings, third-country insurance or reinsurance undertakings, insurance holding companies, mixed financial holding companies, holding companies of third-country insurance and reinsurance undertakings and ancillary services undertakings which are subsidiaries of the parent undertaking;

• (b) full consolidation of data of special purpose vehicles to which the participating undertaking or one or several of its subsidiaries has transferred risk and which are not excluded from the scope of the group solvency calculation pursuant to Article 329(3);

- (c) proportional consolidation of data of the insurance or reinsurance undertakings, third-country insurance or reinsurance undertakings, insurance holding companies, mixed financial holding companies, holding companies of third-country insurance and reinsurance undertakings and ancillary services undertakings managed by an undertaking as referred to in point (a) or by the participating undertaking of the group for which the group solvency is calculated, together with one or more undertakings not included in point (a) and different from the participating undertaking, where those undertakings' responsibility is limited to the share of the capital they hold and those undertakings have rights to the assets and obligations for the liabilities, relating to the related undertakings;

• (d) on the basis of the adjusted equity method referred to in Article 13(3), data of all holdings in related insurance or reinsurance undertakings, third-country insurance or reinsurance undertakings, insurance holding companies, mixed financial holding companies and holding companies of third-country insurance and reinsurance undertakings, which are not subsidiaries of the parent undertaking and which are not covered by points (a) and (c);

• (e) for the sole purposes of Article 233a(1), point(b), of Directive 2009/138/EC, the difference between the following:
• (i) the value of holdings in related undertakings referred to in Article 220(3) of that Directive to which method 2 applies, calculated in accordance with Article 13 of this Regulation;
• (ii) the proportional share of the Solvency Capital Requirement of those related undertakings;

• (f) in accordance with Article 13 of this Regulation, data of all related undertakings, including ancillary services undertakings, collective investment undertakings and investments packaged as funds, other than those referred to in points (a) to (e) of this paragraph.

4. For the purposes of paragraph 1, point (e), of this Article, ‘holdings in related undertakings’ shall mean the ownership, direct or by way of control, of eligible own funds of such related undertakings.

Article 336

Calculation of the Solvency Capital Requirement at group level calculated on the basis of consolidated data

For the purposes of Article 230(1), second subparagraph, point (b), and Article 233a(1), point (b)(i), of Directive 2009/138/EC, the Solvency Capital Requirement at group level calculated on the basis of consolidated data shall be the sum of the following:

• (a) a Solvency Capital Requirement calculated on the basis of consolidated data as referred to in Article 335(1), points (a), (b), (c) and (e), data of collective investment undertakings and investments packaged as funds which are subsidiaries of the parent undertaking, following the rules laid down in Title I, Chapter VI, Section 4 of Directive 2009/138/EC;

• (b) the proportional share of the Solvency Capital Requirement of each undertaking referred to in Article 335(1), point (d), of this Regulation;

• (c) for undertakings as referred to in Article 335(1), point (f), of this Regulation, other than undertakings covered by points (a) and (d) of this paragraph, the amount determined in accordance with Article 13, Articles 168 to 171d, Articles 182 to 187 and Article 188 of this Regulation;

• (d) for related collective investment undertakings or investments packaged as funds as referred to in Article 335(1), point (f) of this Regulation which are not subsidiaries of the participating insurance or reinsurance undertaking, and to which Article 84(1) of this Regulation is applied at solo level, the amount determined in accordance with Title I, Chapter V and Article 84(1) of this Regulation.

For the purposes of the first subparagraph, point (a), Articles 168 to 171d shall not apply to holdings in related undertakings referred to in Article 220(3) of Directive 2009/138/EC.

For the purposes of the first subparagraph, point (b), the Solvency Capital requirement shall be calculated for a related third-country insurance or reinsurance undertaking which is not a subsidiary as if that undertaking had its head office in the Union.

Article 336a

Long-term equity investments at group level

1. For the purposes of Article 336, point (a), the amount of equities that are treated as long-term equity investments shall not be higher than the sum of the following:

• (a) the amounts of equities that are classified as long-term equity investments by undertakings referred to in Article 335(1), point (a);

• (b) the proportional share of equities that are classified as long-term equity investments by undertakings referred to in Article 335(1), point (c).

Article 336b

Simplified calculation for participations in immaterial related undertakings

Where the immaterial related undertaking is an insurance or reinsurance undertaking, the simplified approach shall consist in adding to the sum referred to in Article 336 the maximum of the following:

- (a) the amount determined in accordance with Article 13, Articles 168 to 171d, Articles 182 to 187 and Article 188 of this Regulation;

• (b) the Solvency Capital Requirement of the related undertaking.

Where the immaterial related undertaking is a third-country insurance or reinsurance undertaking, the simplified approach shall consist in adding to the sum referred to in Article 336 the maximum of the following:

• (a) the amount determined in accordance with Article 13, Articles 168 to 171d, Articles 182 to 187 and Article 188 of this Regulation;

• (b) the capital requirement, as laid down in the third country concerned.

For immaterial related undertakings other than those referred to in the second and third subparagraphs, the simplified approach shall consist in adding to the sum referred to in Article 336 the amount determined in accordance with Article 13, Articles 168 to 171d, Articles 182 to 187 and Article 188.

Article 337

Method 1: determination of the local currency for the purposes of the currency risk calculation

2. Notwithstanding paragraph 1, where a material amount of the consolidated technical provisions or the consolidated group own funds is denominated in a currency other than the one used for the preparation of the consolidated accounts, that currency may be considered as the local currency referred to in the first paragraph of Article 188.

Article 338

Method 1: group-specific parameters

3. The standardised methods used to calculate the group-specific parameters are the methods set out in Article 220 of this Regulation.

Article 339

Method 1: best estimate

• (a) the best estimate of the participating insurance or reinsurance undertaking calculated in accordance with Articles 75 to 86 of Directive 2009/138/EC;

- (b) the proportional share referred to in Article 221(1)(a) of Directive 2009/138/EC of the best estimate, calculated in accordance with Articles 75 to 86 of that Directive, of related insurance or reinsurance undertakings and third-country insurance or reinsurance undertakings referred to in Article 335 (1)(a) and (c) of this Regulation.

2. For the purposes of paragraph 1 the best estimates of the participating insurance and reinsurance undertaking and of each related insurance and reinsurance undertaking and third-country insurance and reinsurance undertakings shall be net of any intra-group transactions. In relation to intra-group reinsurance contracts, all of the following adjustments shall be made:

- (a) the best estimate of the undertaking that accepts risks shall not include the cash flows arising from the obligations of the intra-group reinsurance contracts;

• (b) the undertaking that cedes the risk shall not recognise the amounts recoverable from the intra-group reinsurance contracts.

Article 340

Method 1: Risk margin

The consolidated risk margin of technical provisions on the basis of the consolidated data shall be equal to the sum of the following:

• (a) the risk margin of the participating insurance or reinsurance undertaking;

• (b) the proportional share, as referred to in Article 221(1)(a) of Directive 2009/138/EC, of the risk margin of the related insurance or reinsurance undertakings and third-country insurance or reinsurance undertakings referred to in Article 335(1)(a) and (c) of this Regulation.

Article 342

Method 2: Elimination of intra-group creation of capital in relation to the best estimate

1. The aggregated group eligible own funds shall be adjusted to eliminate the impact of an intra-group transaction where the impact of the intra-group transaction affects the best estimates of the insurance and reinsurance undertakings in such way that the amount set out in paragraph 2 is different depending on whether the intra-group transaction is eliminated in the calculation of that amount or not.

• (a) the best estimate of the participating insurance or reinsurance undertaking calculated in accordance with Articles 75 to 86 of Directive 2009/138/EC;

• (b) the proportional share as referred to in Article 221(1)(b) of Directive 2009/138/EC of the best estimate, calculated in accordance with Articles 75 to 86 of that Directive for each related insurance and reinsurance undertaking and related third-country insurance and reinsurance undertaking.

CHAPTER II **INTERNAL MODELS FOR THE CALCULATION OF THE CONSOLIDATED GROUP SOLVENCY CAPITAL REQUIREMENT**

SECTION 1 Full and partial internal models used to calculate only the group solvency capital requirement

Article 343

Application for the use of an internal model to calculate only the consolidated group Solvency Capital Requirement

1. The application to calculate the consolidated group Solvency Capital Requirement using an internal model, in accordance with Article 230(2) of Directive 2009/138/EC, shall be submitted to the group supervisor in writing in an official language of the group supervisor's Member State, or in a language for which the group supervisor has given prior approval.

• (a) regarding the scope of the model:
• (i) a list of the related undertakings that are included in the scope of the internal model for the calculation of the consolidated group Solvency Capital Requirement; for each undertaking, the list shall include a reference to its supervisory authority, the lines of business written by the related insurance and reinsurance undertaking, the method used for the purposes of determining the consolidated data in accordance with Article 335 of this Regulation and the proportional share applied in accordance with Article 221 of Directive 2009/138/EC;
• (ii) the legal and organisational structure of the group, with a description of all subsidiaries, material related undertakings within the meaning of Article 256a of Directive 2009/138/EC and significant branches within the meaning of Article 354(1) of this Regulation and information on relevant operations and transactions within the group, unless this information has not changed since the last reported group regular supervisory reporting pursuant to article 373 of this Regulation;
• (iii) where applicable, a list of the related undertakings excluded from the scope of the partial internal model for the calculation of the consolidated group Solvency Capital Requirement, together with an explanation of the reasons for their exclusion; a description shall be provided of the methods used to assess the risks in these excluded related undertakings in order to demonstrate that the exclusion does not lead to an underestimation of the overall risks to which the group is exposed; the application shall demonstrate that the consolidated group Solvency Capital Requirement calculated using a combination of the internal model and the standard formula will adequately reflect the overall risk profile of the group  , and the application shall describe the techniques used to integrate undertakings as a whole, which are excluded from the scope of the model, and demonstrate the appropriateness of those techniques as required by Article 239(4) of this Regulation, including in cases where the techniques set out in Annex XVIII to this Regulation are applied to undertakings as a whole and not to specific risks. Where it is intended to apply the integration technique 1 referred to in section B of Annex XVIII to this Regulation to one or more of the undertakings that are excluded from the scope of the partial internal model, the application shall also explain why that integration technique would be more appropriate than applying a combination of methods 1 and 2 laid down in Article 233a of Directive 2009/138/EC, where method 2 would be applied to such undertakings;
• (iv) for each related undertaking included in the scope of the internal model for the calculation of the consolidated group Solvency Capital Requirement, a justification of the reasons why the internal model covers a related undertaking for the calculation of the consolidated group Solvency Capital Requirement but it is not used to calculate the Solvency Capital Requirement of that related undertaking; for this purpose and in order to justify that an application is not submitted in accordance with the procedure laid down in Article 231 of Directive 2009/138/EC, the application shall include an explanation of how the internal model used to calculate the consolidated group Solvency Capital Requirement differs from and interacts with an internal model used for the calculation of the Solvency Capital Requirement of any of the related insurance or reinsurance undertakings previously approved by its supervisory authority; the participating undertaking shall provide information on any future plans to extend the use of the internal model to calculate the Solvency Capital Requirement of any related insurance or reinsurance undertaking;

- (b) regarding the group's capital requirements:

• (i) an estimation of the consolidated group Solvency Capital Requirement calculated with the internal model and with the standard formula for the last time prior to the application when the consolidated group Solvency Capital Requirement was calculated with the standard formula;
• (ii) for each related undertaking, the Solvency Capital Requirement calculated with the standard formula for the last point in time prior to the application;
• (iii) where applicable, the regulatory capital requirement for related undertakings that are also regulated undertakings, other than insurance and reinsurance undertakings, included in the scope of the internal model for the last time prior to the application when the consolidated group Solvency Capital Requirement was calculated with the standard formula;
• (iv) an explanation of the difference between the sum of the Solvency Capital Requirements of all the related insurance and reinsurance undertakings of the group and the consolidated group Solvency Capital Requirement calculated with the internal model.

In case an application is submitted before any Solvency Capital Requirement must be calculated, the Solvency Capital Requirements referred to in points (i), (ii) and (iii) shall be calculated for a point in time before the date of the submission of the application.

Article 344

Assessment of the application for the use of an internal model to calculate only the consolidated group Solvency Capital Requirement

• (a) where the exclusion of parts of the business from the scope of the internal model leads to a material underestimation of the risks of the group;

- (b) where the internal model conflicts with an internal model previously approved or in the process of approval by the relevant supervisory authority used for the calculation of the Solvency Capital Requirement of any of the related insurance or reinsurance undertakings.

3. Where applicable, the assessment of the application shall include an evaluation of whether the explanation provided in accordance with Article 343(5)(a)(iii) of the reasons for the exclusion of related undertakings from the internal model for the calculation of the group solvency is appropriate in order to demonstrate that the overall risks to which the group is exposed are not underestimated by using a partial internal model.

Article 345

Decision on the application and transitional plan to extend the scope of a partial internal model used to calculate only the consolidated group Solvency Capital Requirement

Article 346

Use test for internal models used to calculate only the consolidated group Solvency Capital Requirement

1. Where an internal model is used to calculate the consolidated group Solvency Capital Requirement in accordance with Article 230(2) of Directive 2009/138/EC, the requirements set out in Articles 223 to 227 of this Regulation shall be complied with by all of the following undertakings or companies:

• (a) the participating undertaking which calculates the consolidated group Solvency Capital Requirement on the basis of the internal model;

• (b) each related insurance and reinsurance undertaking whose business is fully or partly in the scope of the internal model, only in relation to the output of the internal model at group level;

• (c) each related insurance holding company or mixed financial holding company whose business is fully or partly in the scope of the internal model, only in relation to the output of the internal model at group level.

SECTION 2 Use of a group internal model

Article 347

Application to use a group internal model

3. For the purposes of this Section, the group supervisor and the supervisory authorities of all the Member States in which the head offices of each related insurance and reinsurance undertakings applying for the use of the group internal model to calculate their Solvency Capital Requirement are situated shall be referred to as ‘the supervisory authorities concerned’.