Changes from report parliamentary committee draft to plenary report

Added(44) in Article 106, paragraph 3 is replaced by the following:

Added‘3. The symmetric adjustment made to the standard equity capital charge covering the risk arising from changes in the level of equity prices in relation to equities not covering liabilities from unit-linked life insurance policies shall not result in an equity capital charge being applied that is more than 17 percentage points lower or higher than the standard equity capital charge.’;

Added(45) Article 109 is replaced by the following:

Added‘Article 109 Simplifications in the standard formula

Added1. Insurance and reinsurance undertakings may use a simplified calculation for a specific sub-module or risk module where the nature, scale and complexity of the risks they face justifies it and where it would be disproportionate to require all insurance and reinsurance undertakings to apply the standardised calculation.

AddedNotwithstanding the first subparagraph, low-risk profile undertakings may use a simplified calculation for a specific sub-module or risk module.

AddedFor the purposes of this paragraph, simplified calculations shall be calibrated in accordance with Article 101(3).

Added2. Without prejudice to paragraph 1 of this Article and to Article 102(1), where an insurance or reinsurance undertaking calculates the Solvency Capital Requirement and a risk module or sub-module does not represent a share of more than 5 % of the Basic Solvency Capital Requirement referred to in Article 103, point (a), the undertaking may use a simplified calculation for that risk module or sub-module during a period of no more than three years following that calculation of the Solvency Capital Requirement.

Added3. For the purposes of paragraph 2, the sum over the shares, relative to the Basic Solvency Capital Requirement, of each risk module or sub-module where the simplified calculations pursuant to paragraph 2 are applied shall not exceed 10 %.

AddedThe share of a risk module or sub-module relative to the Basic Solvency Capital Requirement referred to in the first subparagraph shall be that share as calculated the last time when the risk module or sub-module was calculated without a simplified calculation pursuant to paragraph 2.’;

Added(46) Article 111 is amended as follows:

Added(a) in paragraph 1, points (l) and (m) are replaced by the following:

Added‘(l) the simplified calculations provided for specific risk modules and sub-modules referred to in Article 109(1) and for immaterial risk modules and sub-modules referred to in Article 109(2), as well as the criteria that insurance and reinsurance undertakings, including captive insurance undertakings and captive reinsurance undertakings, shall be required to fulfil in order to be entitled to use simplifications, as set out in Article 109(1);

Added(m) the approach to be used with respect to qualifying holdings within the meaning of Article 13(21) in the calculation of the Solvency Capital Requirement, in particular the calculation of the equity risk sub-module referred to in Article 105(5), taking into account the likely reduction in the volatility of the value of those qualifying holdings arising from the strategic nature of those investments and the influence exercised by the insurance or reinsurance undertaking on those investees;’;

Added(b) in paragraph 1, the following subparagraphs are added:

Added‘For the purpose of the first subparagraph, point (h), the methods and adjustments to be used to reflect the reduced scope for risk diversification of insurance and reinsurance undertakings relating to ring-fenced funds shall not apply to the portfolios of assets that are not ring-fenced funds and that are assigned to cover a corresponding best estimate of insurance or reinsurance obligations as referred to in Article 77b(1), point (a).

AddedFor the purpose of the first subparagraph, point (c), the methods, assumptions and standard parameters for the interest rate risk sub-module referred to in Article 105(5), second subparagraph, point (a), shall reflect the risk that interest rates may further decrease even where they are low or negative and its calculation shall be fully consistent with the extrapolation of interest rates according to Article 77a. Notwithstanding the previous sentence, the calculation of the interest rate risk sub-module shall not be required to take into account the risk of interest rates falling to levels below a negative floor where a negative floor is determined such that the likelihood of interest rates across relevant currencies and across maturities not being at all times above the negative floor is sufficiently small.’;

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

Added‘2a. Where the Commission, pursuant to paragraph 1, first subparagraph, point (c), adopts delegated acts supplementing this Directive in order to specify the methods, assumptions and standard parameters to be used for calculating the interest rate risk sub-module referred to in Article 105(5), point (a), with the objective to improve the sensitivity of capital requirements in line with developments in interest rates, such adjustments to the interest rate risk sub-module may be phased in over a transitional period of up to five years. Such phasing-in shall be mandatory and apply to all insurance or reinsurance undertakings.’

Added(d) paragraph 3 is replaced by the following:

Added‘3. By 31 December 2025, and every five years thereafter, EIOPA shall make an assessment of the appropriateness of the methods, assumptions, and standard parameters used when calculating the Solvency Capital Requirement standard formula. It shall in particular take into account the performance of any asset class and financial instruments, the behaviour of investors in those assets and financial instruments as well as developments in international standard setting in financial services. On the basis of EIOPA’s assessment, the Commission shall present, where appropriate, proposals for the amendment of this Directive, or of delegated or implementing acts adopted pursuant hereto.’

Added▌

Added(48) in Article 122, the following paragraph 5 is added:

Added‘5. Member States may allow insurance and reinsurance undertakings to take into account the effect of credit spread movements on the volatility adjustment calculated in accordance with Article 77d in their internal model, only where:

Added(a) the method to take into account the effect of credit spread movements on the volatility adjustment for the euro does not take into account a possible increase of the volatility adjustment by a macro volatility adjustment pursuant to Article 77d(4);

Added(b) the Solvency Capital Requirement is not lower than any of the following:

Added(i) a notional Solvency Capital Requirement calculated as the Solvency Capital Requirement, except that the effect of credit spread movements on the volatility adjustment is taken into account in accordance with the methodology used by EIOPA for the purposes of the publication of technical information pursuant to Article 77e(1), point (c);

Added(ii) a notional Solvency Capital Requirement calculated in accordance with (i), except that the representative portfolio for a currency referred to in Article 77d(2), second subparagraph, is determined on the basis of the assets in which the insurance and reinsurance undertaking is investing instead of the assets of all insurance or reinsurance undertakings with insurance or reinsurance obligations denominated in that currency.

AddedFor the purpose of the first subparagraph, point (b), the determination of the representative portfolio for a given currency shall be based on the undertaking’s assets dominated in that currency and used to cover the best estimate for insurance and reinsurance obligations denominated in that currency.’;

Added(49) Article 132 is amended as follows:

Added(a) in paragraph 3, second subparagraph, the words ‘Directive 85/611/EEC’ are replaced by the words ‘Directive 2009/65/EC’;

Added(b) the following paragraphs 5, 6 and 7 are added:

Added‘5. Member States shall ensure that insurance and reinsurance undertakings take account of possible macroeconomic and financial markets’ developments, and of the potential long-term impact of investment decisions on environmental, social, and governance factors, and, at the request of the supervisory authority, macroprudential concerns when they decide on their investment strategy.

Added6. Insurance and reinsurance undertakings shall assess the extent to which their investment strategy may affect macroeconomic and financial markets’ developments and have the potential to turn into sources of systemic risk, and incorporate such considerations as part of their investment decisions.

Added7. For the purpose of paragraphs 5 and 6 of this Article, macroeconomic developments and macroprudential concerns shall have the same meaning as in Article 45.’;

Added(50) in Article 133(3), the words ‘Directive 85/611/EEC’ are replaced by the words ‘Directive 2009/65/EC’;

Added(51) Article 138(4) is amended as follows:

Added(a) the first subparagraph is replaced by the following:

Added‘In the event of exceptional adverse situations affecting insurance and reinsurance undertakings representing a significant share of the market or of the affected lines of business, as declared by EIOPA, the supervisory authority may extend, for affected undertakings, the period set out in paragraph 3, second subparagraph, by a maximum period of seven years, taking into account all relevant factors including the average duration of the technical provisions.’;

Added(b) in the second subparagraph, the first sentence is replaced by the following:

Added‘Without prejudice to the powers of EIOPA under Article 18 of Regulation (EU) No 1094/2010, for the purposes of this paragraph EIOPA shall, following a request by the supervisory authority concerned and, where appropriate, after consulting the ESRB, declare the existence of exceptional adverse situations.’;

Added(52) Article 139 is replaced by the following:

Added‘Article 139 Non-Compliance with the Minimum Capital Requirement

Added1. Insurance and reinsurance undertakings shall inform the supervisory authority immediately where they observe that the Minimum Capital Requirement is no longer complied with, or where there is a risk of non-compliance in the following three months.

AddedFor the purpose of the first subparagraph of this paragraph, the requirement to inform the supervisory authority shall apply irrespective of whether the insurance or reinsurance undertaking observes the failure to comply with the Minimum Capital Requirement or the risk of non-compliance during a calculation of the Minimum Capital Requirement pursuant to Article 129(4) or during a calculation of the Minimum Capital Requirement between two dates when such calculation is reported to the supervisory authority pursuant to Article 129(4).

Added2. Within one month from the observation of non-compliance with the Minimum Capital Requirement or from the observation of the risk of non-compliance, the insurance or reinsurance undertaking concerned shall submit, for approval by the supervisory authority, a short-term realistic finance scheme to restore, within three months of that observation, the eligible basic own funds, at least to the level of the Minimum Capital Requirement or to reduce its risk profile to ensure compliance with the Minimum Capital Requirement.

Added3. If a winding-up proceeding is not opened within two months of receipt of the information referred to in paragraph 1, the supervisory authority of the home Member State shall consider restricting or prohibiting the free disposal of assets of the insurance or reinsurance undertaking. It shall inform the supervisory authorities of the host Member States accordingly. At the request of the supervisory authority of the home Member State, those authorities shall take the same measures. The supervisory authority of the home Member State shall designate the assets to be covered by such measures.

Added4. EIOPA may develop guidelines for the actions that supervisory authorities should take when they observe a failure to comply with the Minimum Capital Requirement or the risk of non-compliance referred to in paragraph 1.’;

Added(52a) Article 141 is replaced by the following:

Added‘Article 141

AddedSupervisory powers in deteriorating financial conditions

Added1. Following a notification pursuant to Article 136 or following the identification of deteriorating financial conditions pursuant to Article 36(3), where the insurance or reinsurance undertaking’s decisions, including financial ones, would during the following three months result in or are already resulting in non-compliance with any of the items referred to in Article 36(2), points (a) to (e), the supervisory authorities shall have the power to take the necessary measures to restore compliance.

Added2. The measures referred to in paragraph 1 shall be proportionate to the risk and to the extent of non-compliance with regulatory requirements, and may contain the following:

Added(a) requiring the administrative, management or supervisory body of the undertaking to update the pre-emptive recovery plan drawn up in accordance with Article 5 of Directive (EU) xx/xx of the European Parliament and of the Council*, where the circumstances are different from the assumptions set out in that plan;

Added(b) requiring the administrative, management or supervisory body of the undertaking to take measures set out in the pre-emptive recovery plan drawn up in accordance with Article 5 of Directive (EU) xx/xx [PO, please insert the number of the IRRD]. Where the plan is updated pursuant to point (a) of this paragraph, the measures taken shall contain any updated measures;

Added(c) requiring the administrative, management or supervisory body of an undertaking that does not have in place a pre-emptive recovery plan as referred to in Article 5 of Directive (EU) xx/xx [PO, please insert the number of the IRRD], to identify the causes of the non-compliance or likely non-compliance with regulatory requirements and to identify suitable measures and a timeframe for the implementation of those regulatory requirements;

Added(d) requiring the administrative, management or supervisory body of the undertaking to suspend or restrict variable remuneration and bonuses, distributions on own fund instruments or repayment or repurchase of own fund items.

Added3. Where the solvency position of the undertaking continues to deteriorate following a notification as referred to in Article 138(1) or Article 139(1), the supervisory authorities shall have the power to take all measures, including those referred to in paragraph 2, which are necessary to safeguard the interests of policy holders in the case of insurance contracts, or the obligations arising out of reinsurance contracts.

AddedThose measures shall be proportionate and thus reflect the level of the deterioration of the solvency position of the insurance or reinsurance undertaking concerned.’;

Added(53) in Article 144, the following paragraph 4 is added: