Changes from report parliamentary committee draft to plenary report

Added‘With respect to currencies where the risk-corrected spread referred to in paragraph 1, point (c), is not set out in the implementing acts referred to in paragraph 2, no volatility adjustment shall be applied to the relevant risk-free interest rate term structure to calculate the best estimate. With respect Member States whose currency is the euro and where the risk-corrected spread referred to in paragraph 1, point (c), and the percentage referred to in paragraph 1, point (d), are not set out in the implementing acts referred to in paragraph 2, no macro volatility adjustment shall be added to the volatility adjustment.’;

Added(e) the following paragraph 4 is added:

Added‘4. For the purposes of paragraph 2 of this Article, a first smoothing point for a currency set out in an implementing act shall not be modified, unless an assessment of the percentages of bonds with maturity larger than or equal to a given maturity among all bonds denominated in that currency indicates a different first smoothing point pursuant to Article 77a(1) and the percentage set out in delegated acts referred to in Article 86(1), point (b) (iii) for at least two consecutive years.’;

Added(40) Article 86 is amended as follows:

Added(a) paragraph 1 is amended as follows:

Added(i) the following point (aa) is inserted:

Added‘(aa) the prudent deterministic valuation referred to in Article 77(7) as well as the conditions under which that valuation may be used to value the best estimate of technical provisions with options and guarantees.’;

Added(ii) point (b) is replaced by the following:

Added‘(b) the methodologies, principles and techniques for the determination of the relevant risk-free interest rate term structure to be used to calculate the best estimate referred to in Article 77(2), in particular:

Added(i) the formula for the extrapolation referred to in Article 77a(1), including the parameters that determine the convergence speed of the extrapolation;

Added(ii) the method for the determination of the depth, liquidity and transparency of bond markets referred to in Article 77a(1);

Added(iii) the percentage below which the share of bonds with maturities longer than or equal to a given maturity among all bonds shall be regarded as low for the purposes of Article 77a(1);’;

Added(iii) point (i) is replaced by the following:

Added‘(i) methods and assumptions for the calculation of the volatility adjustment referred to in Article 77d, including the following:

Added(i) a formula for the calculation of the spread referred to in paragraph 2 of that Article;

Added(ii) a formula for the calculation of the credit spread sensitivity ratio referred to in paragraphs 3 and 4 of that Article ;

Added(iii) for each relevant asset class, the percentage of the spread that represents the portion attributable to a realistic assessment of expected losses or unexpected credit or other risks of the assets as referred to in Article 77d(3);

Added(iv) the transitional mechanism as referred to in Article 77a(2);’;

Added(b) the following paragraph 1a is inserted:

Added‘1a. The Commission may adopt delegated acts in accordance with Article 301a laying down criteria for assets to be eligible to be included in the portfolio of assets referred to in Article 77b(1), point (a).’;

Added(c) the following paragraph 2a is inserted:

Added‘2a. In order to ensure uniform conditions of application of Article 77(7), EIOPA shall develop draft implementing technical standards specifying the set of scenarios to be used for the prudent deterministic valuation of the best estimate for life obligations referred to in that paragraph.

AddedEIOPA shall submit those draft implementing technical standards to the Commission by [OP please insert date = 12 months after entry into force].

AddedPower is conferred on the Commission to adopt those implementing technical standards in accordance with Article 15 of Regulation (EU) No 1094/2010.’;

Added(41) Article 92 is amended as follows:

Added(a) paragraph 1a is replaced by the following:

Added‘1a. The Commission shall adopt delegated acts in accordance with Article 301a specifying the treatment of participations, within the meaning of Article 212(2), third subparagraph, in financial and credit institutions with respect to the determination of own funds, including approaches to deductions from the basic own funds of an insurance or reinsurance undertaking of material participations in credit and financial institutions.

AddedNotwithstanding the deductions of participations from the own funds eligible to cover the Solvency Capital Requirement as specified in the delegated act adopted pursuant to the first subparagraph, for the purpose of determining the basic own funds as referred to in Article 88, supervisory authorities may permit an insurance or reinsurance undertaking not to deduct the value of its participation in a credit or financial institution, provided that all of the following conditions are met:

Added(a) the insurance or reinsurance undertaking is in one of the circumstances described in point (i) or (ii) of this point:

Added(i) the credit or financial institution and the insurance or reinsurance undertaking belong to the same group, as defined in Article 212, to which group supervision applies in accordance with Article 213(2), points (a), (b) and (c), and the related credit or financial institution is not subject to the deduction referred to in Article 228(6);

Added(ii) supervisory authorities require or permit insurance or reinsurance undertakings to apply technical calculation methods in accordance with Part II of Annex I to Directive 2002/87/EC, and the credit or financial institution is included in the same supplementary supervision under that Directive as the insurance or reinsurance undertaking;

Added(b) supervisory authorities are satisfied as to the level of integrated management, risk management and internal control regarding the undertakings in the scope of group supervision referred to in point (a)(i) of this subparagraph or in the scope of supplementary supervision referred to in point (a)(ii) of this subparagraph;

Added(c) the related participation in the credit or financial institution is an equity investment of strategic nature as specified in the delegated act adopted pursuant to Article 111(1), point (m).’;

Added(b) paragraph 2 is replaced by the following:

Added‘2. Participations in financial and credit institutions as referred to in paragraph 1a shall comprise the following:

Added(a) participations which insurance and reinsurance undertakings hold in:

Added(i) credit institutions and financial institutions within the meaning of Article 4(1), points (1) and (26), of Regulation (EU) No 575/2013 ,

Added(ii) investment firms within the meaning of Article 4(1), point 1, of Directive 2014/65/EU’;

Added(b) Additional Tier 1 instruments referred to in Article 52 of Regulation (EU) No 575/2013 and Tier 2 instruments referred to in Article 63 of that Regulation, as well as Additional Tier 1 and Tier 2 instruments within the meaning of Article 9 of Regulation (EU) No 2019/2033, which insurance and reinsurance undertakings hold in respect of the entities referred to in point (a) of this paragraph in which they hold a participation.’;

Added(42) in Article 95, the second subparagraph is replaced by the following:

Added‘For that purpose, insurance and reinsurance undertakings shall, where applicable, refer to the list of own-funds items referred to in Article 97(1).’;

Added(43) in Article 96, the first paragraph is replaced by the following:

Added‘Without prejudice to Article 95 and Article 97(1) for the purposes of this Directive the following classifications shall be applied:

Added(1) surplus funds falling under Article 91(2) shall be classified in Tier 1;

Added(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 2013/36/EU shall be classified in Tier 2;

Added(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 Part A of Annex I may have against their members by way of a call for supplementary contributions, within the following 12 months, shall be classified in Tier 2.’;

Added(43a) in Article 105, the following paragraph is added:

Added'6a. The Commission is empowered to adopt, in accordance with Article 301a, delegated acts supplementing this Directive, in order to reflect the risk posed by crypto-assets in the market risk sub-module referred to in paragraph 5 and in the counterparty risk sub-module referred to in paragraph 6.'

Added(43b) the following Article 105a is inserted:

Added‘Article 105a

AddedLong-term equity investments

Added1. A sub-set of equity investments may be treated as long-term equity investments if the insurance or reinsurance undertaking demonstrates, to the satisfaction of the supervisory authority, that all of the following conditions are met:

Added(a) the sub-set of equity investments is clearly identified;

Added(b) a policy for long-term investment management is set up for each long-term equity portfolio and reflects the undertaking’s commitment to hold the global exposure to equity in the sub-set of equity investment for a period that exceeds five years on average. The administrative, management or supervisory board of the undertaking has signed off on these investment management policies and these policies are frequently reviewed against the actual management of the portfolios, and reported in the own-risk solvency assessment of the undertaking pursuant to Article 45;

Added(c) the sub-set of equity investments consists only of equities that are listed in countries that are member of the OECD or of unlisted equities of companies that have their head offices in countries that are member of the OECD;

Added(d) the insurance or reinsurance undertaking is able to demonstrate to the satisfaction of the supervisory authority that it is able to maintain the sub-set of equity investments over the holding period referred to in point (b);

Added(e) the risk management, asset-liability management and investment policies of the insurance or reinsurance undertaking reflect the undertaking's intention to hold the sub-set of equity investments for a period that is compatible with the requirement of point (b) and its ability to meet the requirement of point (d).

Added2. Where equities are held within collective investment undertakings or within alternative investment funds such as European Long Term Investment Funds (ELTIFs), the conditions laid down in paragraph 1 may be assessed at the level of the funds and not of the underlying assets held within those funds.

Added3. Insurance or reinsurance undertakings that treat a sub-set of equity investments as long-term equity investments in accordance with paragraph 1 of this Article shall not revert back to an approach that does not include long-term equity investments. Where an insurance or reinsurance undertaking that treats a sub-set of equity investments as long-term equity investments is no longer able to comply with the conditions laid down in paragraph 1 of this Article, it shall immediately inform the supervisory authority and shall cease to apply the instantaneous decrease in the value of equities referred to in paragraph 4.

Added4. The capital requirement for long-term equity investments shall be equal to the loss in the basic own funds that would result from an instantaneous decrease equal to 22 % in the value of investments that are treated as long-term equity.