Commission Delegated Regulation (EU) 2016/467 of 30 September 2015 amending Commission Delegated Regulation (EU) 2015/35 concerning the calculation of regulatory capital requirements for several categories of assets held by insurance and reinsurance undertakings (Text with EEA relevance)

‘6 Where the criteria referred to in Article 9(4) of this Regulation are satisfied, and where the use of the valuation methods referred to in points (a) and (b) of paragraph 1 is not possible, holdings in related undertakings may be valued based on the valuation method the insurance or reinsurance undertakings uses for preparing its annual or consolidated financial statements. In such cases, the participating undertaking shall deduct from the value of the related undertaking the value of goodwill and other intangible assets that would be valued at zero in accordance with Article 12(2) of this Regulation.’;

‘3 Notwithstanding paragraphs 1 and 2, insurance and reinsurance undertakings shall not deduct strategic participations as referred to in Article 171 which are included in the calculation of the group solvency on the basis of method 1 as set out in Annex I to Directive 2002/87/EC or on the basis of method 1 as set out in Article 230 of Directive 2009/138/EC.’;

1 For the purposes of this Regulation, qualifying infrastructure investment shall include investment in an infrastructure project entity that meets the following criteria: (a) the infrastructure project entity can meet its financial obligations under sustained stresses that are relevant for the risk of the project; (b) the cash flows that the infrastructure project entity generates for debt providers and equity investors are predictable; (c) the infrastructure assets and infrastructure project entity are governed by a contractual framework that provides debt providers and equity investors with a high degree of protection including the following: (a) where the revenues of the infrastructure project entity are not funded by payments from a large number of users, the contractual framework shall include provisions that effectively protect debt providers and equity investors against losses resulting from the termination of the project by the party which agrees to purchase the goods or services provided by the infrastructure project entity; (b) the infrastructure project entity has sufficient reserve funds or other financial arrangements to cover the contingency funding and working capital requirements of the project; Where investments are in bonds or loans, this contractual framework shall also include the following: (i) debt providers have security to the extent permitted by applicable law in all assets and contracts necessary to operate the project; (ii) equity is pledged to debt providers such that they are able to take control of the infrastructure project entity prior to default; (iii) the use of net operating cash flows after mandatory payments from the project for purposes other than servicing debt obligations is restricted; (iv) contractual restrictions on the ability of the infrastructure project entity to perform activities that may be detrimental to debt providers, including that new debt cannot be issued without the consent of existing debt providers; (d) where investments are in bonds or loans, the insurance or reinsurance undertaking can demonstrate to the supervisor that it is able to hold the investment to maturity; (e) where investments are in bonds for which a credit assessment by a nominated ECAI is not available, the investment instrument is senior to all other claims other than statutory claims and claims from derivatives counterparties; (f) where investments are in equities, or bonds or loans for which a credit assessment by a nominated ECAI is not available, the following criteria are met: (i) the infrastructure assets and infrastructure project entity are located in the EEA or in the OECD; (ii) where the infrastructure project entity is in the construction phase the following criteria shall be fulfilled by the equity investor, or where there is more than one equity investor, the following criteria shall be fulfilled by a group of equity investors as a whole: the equity investors have a history of successfully overseeing infrastructure projects and the relevant expertise, the equity investors have a low risk of default, or there is a low risk of material losses for the infrastructure project entity as a result of the their default, the equity investors are incentivised to protect the interests of investors; (iii) the infrastructure project entity has established safeguards to ensure completion of the project according to the agreed specification, budget or completion date; (iv) where operating risks are material, they are properly managed; (v) the infrastructure project entity uses tested technology and design; (vi) the capital structure of the infrastructure project entity allows it to service its debt; (vii) the refinancing risk for the infrastructure project entity is low; (viii) the infrastructure project entity uses derivatives only for risk-mitigation purposes.

2 For the purposes of paragraph 1(b), the cash flows generated for debt providers and equity investors shall not be considered predictable unless all except an immaterial part of the revenues satisfies the following conditions: (a) one of the following criteria is met: (i) the revenues are availability-based; (ii) the revenues are subject to a rate-of-return regulation; (iii) the revenues are subject to a take-or-pay contract; (iv) the level of output or the usage and the price shall independently meet one of the following criteria: it is regulated, it is contractually fixed, it is sufficiently predictable as a result of low demand risk; (b) where the revenues of the infrastructure project entity are not funded by payments from a large number of users, the party which agrees to purchase the goods or services provided by the infrastructure project entity shall be one of the following: (i) an entity listed in Article 180(2) of this Regulation; (ii) a regional government or local authority listed in the Regulation adopted pursuant to Article 109a(2)(a) of Directive 2009/138/EC; (iii) an entity with an ECAI rating with a credit quality step of at least 3; (iv) an entity that is replaceable without a significant change in the level and timing of revenues.’;

1 The transitional measure for standard equity risk set out in Article 308b(13) of Directive 2009/138/EC shall only apply to equities that were purchased on or before 1 January 2016 and which are not subject to the duration-based equity risk pursuant to Article 304 of that Directive.

2 Where equities are held within an collective investment undertaking or other investments packaged as funds, and where the look-through approach is not possible, the transitional measure set out in Article 308b(13) of Directive 2009/138/EC shall be applied to the proportion of equities held within the collective investment undertaking or investment packaged as funds in accordance with the target underlying asset allocation on 1 January 2016, provided the target allocation is available to the undertaking. The proportion of equities to which the transitional is applied shall be reduced annually in proportion to the asset turnover ratio of the collective investment undertaking or investment packaged as funds. Where the target allocation for equity investments of the collective investment undertaking or investment packaged as funds increases, the proportion of equities the transitional is applied to shall not increase.’;

1 Insurance and reinsurance undertakings shall conduct adequate due diligence prior to making a qualifying infrastructure investment, including all of the following: (a) a documented assessment of how the project satisfies the criteria set out in Article 164a, which has been subject to a validation process, carried out by persons that are free from influence from those persons responsible for the assessment of the criteria, and have no potential conflicts of interest with those persons; (b) a confirmation that any financial model for the cash flows of the project has been subject to a validation process carried out by persons that are free from influence from those persons responsible for the development of the financial model, and have no potential conflicts of interest with those persons.

2 Insurance and reinsurance undertakings with a qualifying infrastructure investment shall regularly monitor and perform stress tests on the cash flows and collateral values supporting the infrastructure project entity. Any stress tests shall be commensurate with the nature, scale and complexity of the risk inherent in the infrastructure project.

3 Where insurance or reinsurance undertakings hold material qualifying infrastructure investments, they shall, when establishing the written procedures referred to in Article 41(3) of Directive 2009/138/EC, include provisions for an active monitoring of these investments during the construction phase, and for a maximisation of the amount recovered from these investments in case of a work-out scenario.

4 Insurance or reinsurance undertakings with a qualifying infrastructure investment in bonds or loans shall set up their asset-liability management to ensure that, on an ongoing basis, they are able to hold the investment to maturity.’;

‘3 Bonds or loans for which a credit assessment by a nominated ECAI is available shall be assigned a risk factor stressi depending on the credit quality step and the modified duration duri of the bond or loan i according to the following table. Credit quality step012345 and 6 Duration (duri) stressiaibiaibiaibiaibiaibiaibiup to 5bi · duri—0,9 %—1,1 %—1,4 %—2,5 %—4,5 %—7,5 %More than 5 and up to 10ai + bi · (duri – 5)4,5 %0,5 %5,5 %0,6 %7,0 %0,7 %12,5 %1,5 %22,5 %2,5 %37,5 %4,2 %More than 10 and up to 15ai + bi · (duri – 10)7,0 %0,5 %8,5 %0,5 %10,5 %0,5 %20,0 %1,0 %35,0 %1,8 %58,5 %0,5 %More than 15 and up to 20ai + bi · (duri – 15)9,5 %0,5 %11 %0,5 %13,0 %0,5 %25,0 %1,0 %44,0 %0,5 %61,0 %0,5 %More than 20min[ai + bi · (duri – 20);1]12,0 %0,5 %13,5 %0,5 %15,5 %0,5 %30,0 %0,5 %46,6 %0,5 %63,5 %0,5 %’

‘4 Bonds and loans for which a credit assessment by a nominated ECAI is not available and for which debtors have not posted collateral that meets the criteria set out in Article 214 shall be assigned a risk factor stressi depending on the duration duri of the bond or loan i according to the following table: Duration (duri)stressiup to 53 % · duriMore than 5 and up to 1015 % + 1,7 % · (duri – 5)More than 10 and up to 2023,5 % + 1,2 % · (duri – 10)More than 20min(35,5 % + 0,5 % · (duri – 20);1)’

‘3 Where insurance or reinsurance undertakings have concluded several excess of loss reinsurance contracts that each meet the requirements set out in point (d) of paragraph 2, and that in combination meet the requirements set out in points (a), (b) and (c) of paragraph 2, their combination shall be considered as one recognisable excess of loss reinsurance contract.’;

‘4 The solvency and financial condition report shall include information on the areas set out in Article 263 in complying with the disclosure requirements of the insurance or reinsurance undertaking as laid down in paragraphs 1 and 3 of this Article.’;

‘3 Aggregated annual statistical data concerning the supervised undertakings and groups in accordance with Article 316 shall be disclosed in respect of each calendar year within three months after the date by which the undertakings having a financial year ending 31 December are required by Article 312(1)(c) to submit annual quantitative templates. Information concerning the supervisory authorities shall be made available within four months after the 31 December of each calendar year.’;

‘1 In assessing whether certain own funds eligible to cover the Solvency Capital Requirement of a related insurance or reinsurance undertaking, a related third country insurance or reinsurance undertaking, an insurance holding company or a mixed financial holding company cannot effectively be made available to cover the group Solvency Capital Requirement, the supervisory authorities shall consider all of the following elements: (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; (d) whether, where method 2 is used, the own-fund item does not satisfy the requirements set out in Articles 71, 73 and 77; for this purpose, the term “Solvency Capital Requirement” in those Articles shall include both the Solvency Capital Requirement of the related undertaking that has issued the own fund item and the group Solvency Capital Requirement.’;

‘2 Participating insurance and reinsurance undertakings, insurance holding companies or mixed financial holding companies shall submit to the group supervisor the information referred to in paragraph 1 no later than 26 weeks after the reference date of the opening financial statement as referred to in Article 314(1)(a).’;

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.