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

• (c) FP(existing,s) denotes the expected present value of premiums to be earned by the insurance and reinsurance undertaking in the segment s after the following 12 months for existing contracts;

• (d) FP(future,s) denotes the following amount with respect to contracts where the initial recognition date falls in the following 12 months:
• (i) for all such contracts whose initial term is one year or less, the expected present value of premiums to be earned by the insurance or reinsurance undertaking in the segment s, but excluding the premiums to be earned during the 12 months after the initial recognition date;
• (ii) for all such contracts whose initial term is more than one year, the amount equal to 30 % of the expected present value of premiums to be earned by the insurance or reinsurance undertaking in the segment s after the following 12 months.

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provided that all of the following conditions are met:

• (a) the administrative, management or supervisory body of the insurance or reinsurance undertaking has decided that its earned premiums in the segment s during the following 12 months will not exceed Ps;

• (b) the insurance or reinsurance undertaking has established effective control mechanisms to ensure that the limits on earned premiums referred to in point (a) will be met;

• (c) the insurance or reinsurance undertaking has informed its supervisory authority about the decision referred to in point (a) and the reasons for it.

For the purposes of this paragraph, the terms Ps, FP(existing,s) and FP(future,s) shall be denoted in accordance with points (a), (c) and (d) of paragraph 3.

• (a) premiums in relation to non-insurance events or settled insurance claims that are not accounted for in the cash-flows referred to in Article 41(3);

• (b) premiums for reinsurance contracts that do not comply with Articles 209, 210, 211 and 213.

7. For all segments set out in Annex XIV, the default factor for geographical diversification shall be either equal to 1 or calculated in accordance with Annex III.

Article 148

Standard deviation for NSLT health premium and reserve risk

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where:

• (a) VNSLTh denotes the volume measure for NSLT health premium and reserve risk;

• (b) the sum covers all possible combinations (s,t) of the segments set out in Annex XIV;

• (c) CorrHS(s,t) denotes the correlation coefficient for NSLT health premium and reserve risk for segment s and segment t set out in Annex XV;

• (d) σs and σt denote standard deviations for NSLT health premium and reserve risk of segments s and t respectively;

• (e) Vs and Vt denote volume measures for premium and reserve risk of segments s and t, referred to in Annex XIV, respectively.

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where:

• (a) σ(prem,s) denotes the standard deviation for NSLT health premium risk of segment s determined in accordance with paragraph 3;

• (b) σ(res,s) denotes the standard deviation for NSLT health reserve risk of segment s as set out in paragraphs 4 and 5;

• (c) V(prem,s) denotes the volume measure for premium risk of segment s referred to in Article 147;

• (d) V(res,s) denotes the volume measure for reserve risk of segment s referred to in Article 147.

Where the non-proportional reinsurance is an adverse development cover that meets the conditions set out in the fourth subparagraph, the adjustment factor for non-proportional reinsurance referred to in the first subparagraph shall be equal to the following:

Adjust(NP,s) = max (0; Image omitted; see official source )

where:

• (a) V(net,res,s) denotes the nominal best estimate of the insurance and reinsurance obligations in the segment net of the amounts recoverable from reinsurance contracts and special purpose vehicles of the adverse development cover;

• (b) Image omitted; see official source

• (c) ADC(rec,s) denotes the adverse development cover recovery under the reserve risk scenario;

• (d) Par denotes the maximum of the additional reinsurance premium, or the equivalent thereof, and zero;

• (e) C denotes the cession to the reinsurer, expressed as percentage of the claim amounts between attachment and detachment points that the reinsurance covers;

• (f) Pr denotes the prudency factor, which shall be equal to 100 %.

The adverse development covers referred to in the second subparagraph shall meet the following conditions:

• (a) each adverse development cover is only applied to one specific group of policies with the same risk characteristics within the same segment, and has a separate and distinct attachment and detachment point;

• (b) the attachment point referred to in point (a) does not exceed the product of V(net,res,s) referred to in the second subparagraph, point (a), and the sum of 1 and σ(res,s,annex) referred to in point (b) of that subparagraph.

For non-proportional reinsurance other than those referred to in the second subparagraph, the adjustment factor shall be 100 %.

ADC(rec,s) = min[ Image omitted; see official source · (1 + 3 · σ(res,s,annex)) – R(ap); R(cs)]

where:

• (a) V(net,res,s) denotes the nominal best estimate of the insurance and reinsurance obligations in the segment net of the amounts recoverable from reinsurance contracts and special purpose vehicles of the adverse development cover;

• (b) R(ap) denotes the reinsurance structure attachment point;

• (c) R(cs) denotes the size of the adverse development cover that is available to the insurance or reinsurance undertaking;

- (d) Image omitted; see official source denotes the standard deviation for NSLT health reserve risk of segment s as set out in Annex XIV.

Article 149

Health risk equalisation systems

• (a) the standard deviations are determined separately for each of the segments 1, 2 and 3, as set out in Annex XIV, and separately for premium and reserve risk;

• (b) for each of the segments set out in Annex XIV, the standard deviation for premium risk is the lower of the following amounts:
• (i) the standard deviation for NSLT health premium risk of that segment set out in Annex XIV;
• (ii) the higher of the following amounts:
• A. a third of the standard deviation for NSLT health premium risk of that segment set out in Annex XIV;
• B. an estimate of the representative standard deviation of an insurance undertaking's combined ratio, being the ratio of the following annual amounts:
• — the sum of the payments, including the relating expenses, and technical provisions set up for claims incurred during the year for the business subject to the HRES, including any changes due to the HRES;
• — the earned premium of the year for the business subject to the HRES;

• (c) for each of the segments set out in Annex XIV, the standard deviation for reserve risk is the lower of the following amounts:
• (i) the standard deviation for NSLT health reserve risk of that segment set out in Annex XIV;
• (ii) the higher of the following amounts;
• A. a third of the standard deviation for NSLT health reserve risk of that segment set out in Annex XIV:
• B. an estimate of the representative standard deviation of an insurance undertaking's run-off ratio, being the ratio of the following annual amounts:
• — the sum of the best estimate provision at the end of the year for claims that were outstanding at the beginning of the year and any claims and expense payments made during the year for claims that were outstanding at the beginning of the year: both amounts include any amendments due to the HRES;
• — the best estimate provision at the beginning of the year for claims outstanding of the business subject to the HRES, including any amendments due to the HRES;

• (d) the determination of the standard deviation is based on adequate, applicable and relevant actuarial and statistical techniques;

• (e) the determination of the standard deviation is based on complete, accurate and appropriate data that is directly relevant for the business subject to the HRES and reflects the average degree of diversification at the level of insurance undertakings;

• (f) the determination of the standard deviation is based on current and credible information and realistic assumptions;

• (g) the determination of the standard deviation also takes into account any risks which are not mitigated by the HRES, in particular the risk referred to in Article 105(4)(a) of Directive 2009/138/EC and risks which are not reflected in the health catastrophe risk sub-module and that could affect a larger number of insurance undertakings subject to the HRES at the same time;

• (h) the methodology for the calculation of the standard deviation and the calculation of the standard deviation is publicly available.

Where only a part of an insurance undertaking's business in a segment s is subject to the HRES, the undertaking shall use a standard deviation for NSLT health premium risk of the segment in the calculation of the standard deviation for NSLT health premium and reserve risk referred to in Article 148(1) that is equal to the following:

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where:

• (a) σ(prem,s) denotes the standard deviation for NSLT health premium risk segment s set out in Annex XIV;

• (b) V(prem,s,nHRES) denotes the volume measure for NSLT health premium risk of the business in segment s that is not subject to the HRES;

• (c) σ(prem,s,HRES) denotes the standard deviation for NSLT health premium risk of segment s for business subject to the HRES calculated in accordance with paragraph 2;

• (d) V(prem,s,HRES) denotes the volume measure for NSLT health premium risk of business in segment s that is subject to the HRES.

V(prem,s,HRES) and V(prem,s,nHRES) shall be calculated in the same way as the volume measure for NSLT health premium risk of segment s referred to in Article 147, but V(prem,s,HRES) shall only take into account the insurance and reinsurance obligations subject to HRES and V(prem,s,nHRES) shall only take into account the insurance and reinsurance obligations not subject to the HRES.

Where only a part of an insurance undertaking's business in a segment s is subject to the HRES, the undertaking shall use a standard deviation for NSLT health premium risk of the segment in the calculation of the standard deviation for NSLT health premium and reserve risk referred to in Article 148(1) that is equal to the following:

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where:

• (a) σ(res,s) denotes the standard deviation for NSLT health reserve risk segment s as set out in Annex XIV;

• (b) V(res,s,nHRES) denotes the volume measure for NSLT health reserve risk of the business in segment s that is not subject to the HRES;

• (c) σ(res,s,HRES) denotes the standard deviation for NSLT health reserve risk of segment s for business subject to the HRES calculated in accordance with paragraph 2;

• (d) V(res,s,HRES) denotes the volume measure for NSLT health reserve risk of business in segment s that is subject to the HRES.

V(res,s,nHRES) and V(res,s,HRES) shall be calculated in the same way as the volume measure for NSLT health reserve risk of segment s referred to in Article 147, but V(res,s,HRES) shall only take into account the insurance and reinsurance obligations subject to the HRES and V(res,s,nHRES) shall only take into account the insurance and reinsurance obligations not subject to the HRES.

5. Insurance and reinsurance undertakings may replace the standard deviations for NSLT health premium and reserve risk for business subject to a HRES with parameters specific to the insurance and reinsurance undertaking in accordance with Article 104(7) of Directive 2009/138/EC. Supervisory authorities may require insurance and reinsurance undertakings to replace those standard deviations with parameters specific to the undertaking in accordance with Article 110 of that Directive 2009/138/EC.

Article 150

NSLT health lapse risk sub-module

• (a) the discontinuance of 40 % of the insurance policies for which discontinuance would result in an increase of technical provisions without the risk margin;

• (b) where reinsurance contracts cover insurance or reinsurance contracts that will be written in the future, the decrease of 40 % of the number of those future insurance or reinsurance contracts used in the calculation of technical provisions.

3. For the purposes of determining the loss in basic own funds of the insurance or reinsurance undertaking under the event referred to in point (a) of paragraph 1, the undertaking shall base the calculation on the type of discontinuance which most negatively affects the basic own funds of the undertaking on a per policy basis.

Article 151

SLT health underwriting risk sub-module

• (a) the health mortality risk sub-module;

• (b) the health longevity risk sub-module;

• (c) the health disability-morbidity risk sub-module;

• (d) the health expense risk sub-module;

• (e) the health revision risk sub-module;

• (f) the SLT health lapse risk sub-module.

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where:

• (a) the sum denotes all possible combinations (i,j) of the sub-modules set out in paragraph 1;

• (b) CorrSLTH(i,j) denotes the correlation parameter for SLT health underwriting risk for sub-modules i and j;

• (c) SCRi and SCRj denote the capital requirements for risk sub-module i and j respectively.

| j *i | Health mortality | Health longevity | Health disability-morbidity | Health expense | Health revision | SLT health lapse* |

| --- | --- | --- | --- | --- | --- | --- | | Health mortality | 1 | – 0,25 | 0,25 | 0,25 | 0 | 0 | | Health longevity | – 0,25 | 1 | 0 | 0,25 | 0,25 | 0,25 | | Health disability-morbidity | 0,25 | 0 | 1 | 0,5 | 0 | 0 | | Health expense | 0,25 | 0,25 | 0,5 | 1 | 0,5 | 0,5 | | Health revision | 0 | 0,25 | 0 | 0,5 | 1 | 0 | | SLT health lapse | 0 | 0,25 | 0 | 0,5 | 0 | 1 |

Article 152

Health mortality risk sub-module

• (a) multiple insurance policies in respect of the same insured person may be treated as if they were one insurance policy;

• (b) where the calculation of technical provisions is based on groups of policies as referred to in Article 35, the identification of the policies for which technical provisions increase under an increase of mortality rates may also be based on those groups of policies instead of single policies, provided that it yields a result which is not materially different.

3. With regard to reinsurance obligations, the identification of the policies for which technical provisions increase under an increase of mortality rates shall apply to the underlying insurance policies only and shall be carried out in accordance with paragraph 2.

Article 153

Health longevity risk sub-module

• (a) multiple insurance policies in respect of the same insured person may be treated as if they were one insurance policy;

• (b) where the calculation of technical provisions is based on groups of policies as referred to in Article 35, the identification of the policies for which technical provisions increase under an decrease of mortality rates may also be based on those groups of policies instead of single policies, provided that it yields a result which is not materially different.

3. With regard to reinsurance obligations, the identification of the policies for which technical provisions increase under an decrease of mortality rates shall apply only to the underlying insurance policies and shall be carried out in accordance with paragraph 2.

Article 154

Health disability-morbidity risk sub-module

• (a) the capital requirement for medical expense disability-morbidity risk;

• (b) the capital requirement for income protection disability-morbidity risk.

• (a) the scenarios underlying the calculation of the capital requirement for medical expense disability-morbidity risk only to medical expense insurance and reinsurance obligations where the underlying business is pursued on a similar technical basis to that of life insurance;

- (b) the scenarios underlying the calculation of the capital requirement for income protection disability-morbidity risk only to income protection insurance and reinsurance obligations where the underlying business is pursued on a similar technical basis to that of life insurance.

Article 155

Capital requirement for medical expense disability-morbidity risk

• (a) the capital requirement for the increase of medical payments;

• (b) the capital requirement for the decrease of medical payments.

• (a) an increase of 5 % in the amount of medical payments taken into account in the calculation of technical provisions;

• (b) an increase by 1 percentage point to the inflation rate of medical payments (expressed as a percentage) used for the calculation of technical provisions.

• (a) a decrease of 5 % in the amount of medical payments taken into account in the calculation of technical provisions;

- (b) a decrease by 1 percentage point from the inflation rate of medical payments (expressed as a percentage) used for the calculation of technical provisions.

Article 156

Capital requirement for income protection disability-morbidity risk

The capital requirement for income protection disability-morbidity risk shall be equal to the loss in basic own funds of insurance and reinsurance undertakings that would result from the following combination of instantaneous permanent changes:

• (a) an increase of 35 % in the disability and morbidity rates which are used in the calculation of technical provisions to reflect the disability and morbidity in the following 12 months;

• (b) an increase of 25 % in the disability and morbidity rates which are used in the calculation of technical provisions to reflect the disability and morbidity in the years after the following 12 months;

• (c) where the disability and morbidity recovery rates used in the calculation of technical provisions are lower than 50 %, a decrease of 20 % in those rates;

- (d) where the disability and morbidity persistency rates used in the calculation of technical provisions are equal or lower than 50 %, an increase of 20 % in those rates.

Article 157

Health expense risk sub-module

The capital requirement for health expense risk shall be equal to the loss in basic own funds of insurance and reinsurance undertakings that would result from the combination of the following instantaneous permanent changes:

• (a) an increase of 10 % in the amount of expenses taken into account in the calculation of technical provisions;

• (b) an increase of 1 percentage point to the expense inflation rate (expressed as a percentage) used for the calculation of technical provisions.

For reinsurance obligations, insurance and reinsurance undertakings shall apply those changes to their own expenses and, where relevant, to the expenses of the ceding undertakings.

Article 158

Health revision risk sub-module

The capital requirement for health revision risk shall be equal to the loss in basic own funds of insurance and reinsurance undertakings that would result from an instantaneous permanent increase of 4 % in the amount of annuity benefits, only on annuity insurance and reinsurance obligations where the benefits payable under the underlying insurance policies could increase as a result of changes in inflation, the legal environment or the state of health of the person insured.

Article 159

SLT health lapse risk sub-module

• (a) capital requirement for the risk of a permanent increase in SLT health lapse rates;

• (b) capital requirement for the risk of a permanent decrease in SLT health lapse rates;

• (c) capital requirement for SLT health mass lapse risk.

• (a) all legal or contractual policyholder rights to fully or partly terminate, surrender, decrease, restrict or suspend the insurance or reinsurance cover or permit the insurance policy to lapse;

• (b) all legal or contractual policyholder rights to fully or partially establish, renew, increase, extend or resume the insurance or reinsurance cover.

For the purposes of point (b), the change in the option exercise rate referred to in paragraphs 2 and 3 should be applied to the rate reflecting that the relevant option is not exercised.

• (a) the rights referred to in paragraph 4 of the policy holders of the reinsurance contracts;

• (b) the rights set out in paragraph 4 of the policy holders of the insurance contracts underlying the reinsurance contracts;

• (c) where reinsurance contracts cover insurance or reinsurance contracts that will be written in the future, the right of the potential policy holders not to conclude those insurance or reinsurance contracts.

• (a) the discontinuance of 40 % of the insurance policies for which discontinuance would result in an increase of technical provisions without the risk margin;

• (b) where reinsurance contract covers insurance or reinsurance contracts that will be written in the future, the decrease of 40 % of the number of those future insurance or reinsurance contracts used in the calculation of the technical provisions.

The events referred to in the first subparagraph shall apply uniformly to all insurance and reinsurance contracts concerned. In relation to reinsurance contracts the event referred to in point (a) shall apply to the underlying insurance contracts.

For the purposes of determining the loss in basic own funds of the insurance or reinsurance undertaking under the event referred to in point (a), the undertaking shall base the calculation on the type of discontinuance which most negatively affects the basic own funds of the undertaking on a per policy basis.

7. Where the largest of the capital requirements referred to in points (a) (b), and (c) of paragraph 1 of this Article and the largest of the corresponding capital requirements calculated in accordance with Article 206(2) of this Regulation are not based on the same scenario, the capital requirement for lapse risk referred to in Article 105(3)(f) of Directive 2009/138/EC shall be the capital requirement referred to in points (a), (b) or (c) of paragraph 1 of this Article for which the underlying scenario results in the largest corresponding capital requirement calculated in accordance with Article 206(2) of this Regulation.

Article 160

Health catastrophe risk sub-module

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where:

• (a) SCRma denotes the capital requirement of the mass accident risk sub-module;

• (b) SCRac denotes the capital requirement of the accident concentration risk sub-module;

• (c) SCRp denotes the capital requirement of the pandemic risk sub-module.

• (a) the mass accident risk sub-module to health insurance and reinsurance obligations other than workers' compensation insurance and reinsurance obligations;

• (b) the accident concentration risk sub-module to workers' compensation insurance and reinsurance obligations and to group income protection insurance and reinsurance obligations;

- (c) the pandemic risk sub-module to health insurance and reinsurance obligations other than workers' compensation insurance and reinsurance obligations.

Article 161

Mass accident risk sub-module

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where:

• (a) the sum includes all countries set out in Annex XVI;

• (b) SCR(ma,s) denotes the capital requirement for mass accident risk of country s.

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where:

• (a) rs denotes the ratio of persons affected by the mass accident in country s as set out in Annex XVI;

• (b) the sum includes the event types e set out in Annex XVI;

• (c) xe denotes the ratio of persons who will receive benefits of event type e as a result of the accident as set out in Annex XVI;

• (d) E(e,s) denotes the total value of benefits payable by insurance and reinsurance undertakings for event type e in country s.

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where:

• (a) the sum includes all insured persons i of the insurance or reinsurance undertaking who are insured against event type e and are inhabitants of country s;

• (b) SI(e,i) denotes the value of the benefits payable by the insurance or reinsurance undertaking for the insured person i in case of event type e.

The value of the benefits shall be the sum insured or where the insurance contract provides for recurring benefit payments the best estimate of the benefit payments in case of event type e. Where the benefits of an insurance contract depend on the nature or extent of any injury resulting from event e, the calculation of the value of the benefits shall be based on the maximum benefits obtainable under the contract which are consistent with the event. For medical expense insurance and reinsurance obligations the value of the benefits shall be based on an estimate of the average amounts paid in case of event e, assuming the insured person is disabled for the duration specified and taking into account the specific guarantees the obligations include.

4. Where Article 88 is complied with, insurance or reinsurance undertakings may calculate the value of benefits payable to insured person referred to in paragraph 3 based on homogenous risk groups, provided that the grouping of policies complies with Article 35.

Article 162

Accident concentration risk sub-module

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where:

• (a) the sum includes all countries c;

• (b) SCR(ac,c) denotes the capital requirement for accident concentration risk of country c.

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where:

• (a) Cc denotes the largest accident risk concentration of insurance and reinsurance undertakings in country c;

• (b) the sum includes the event types e set out in Annex XVI;

• (c) xe denotes the ratio of persons which will receive benefits of event type e as a result of the accident as set out in Annex XVI;

• (d) CE(e,c) denotes the average value of benefits payable by insurance and reinsurance undertakings for event type e for the largest accident risk concentration in country c.

• (a) the insurance or reinsurance undertaking has a workers' compensation insurance or reinsurance obligation or an group income protection insurance or reinsurance obligation in relation to each of the persons;

• (b) the obligations in relation to each of the persons cover at least one of the events set out in Annex XVI;

• (c) the persons are working in the same building which is situated in country c.

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where:

• (a) Ne denotes the number of insured persons of the insurance or reinsurance undertaking which are insured against event type e and which belong to the largest accident risk concentration of the insurance or reinsurance undertaking in country c;

• (b) the sum includes all the insured persons referred to in point (a);

• (c) SI(e,i) denotes the value of the benefits payable by the insurance or reinsurance undertaking for the insured person i in case of event type e.

The value of the benefits referred to in point (c) shall be the sum insured or where the contract provides for recurring benefit payments the best estimate of the benefit payments in case of event type e. Where the benefits of an insurance policy depend on the nature or extent of the injury resulting from event e, the calculation of the value of the benefits shall be based on the maximum benefits obtainable under the policy, which are consistent with the event. For medical expense insurance and reinsurance obligations the value of the benefits shall be based on an estimate of the average amounts paid in case of event e, assuming the insured person is disabled for the duration specified and taking into account the specific guarantees the obligations include.

5. Where Article 88 is complied with, insurance or reinsurance undertakings may calculate the value of the benefits payable by the insurance or reinsurance undertaking for the insured person referred to in paragraph 4 based on homogenous risk groups, provided that the grouping of policies complies with the requirements set out in Article 35.

Article 163

Pandemic risk sub-module

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where:

• (a) E denotes the income protection pandemic exposure of insurance and reinsurance undertakings;

• (b) the sum includes all countries c;

• (c) Nc denotes the number of insured persons of insurance and reinsurance undertakings which meet all of the following conditions:
• (i) the insured persons are inhabitants of country c,
• (ii) the insured persons are covered by medical expense insurance or reinsurance obligations, other than workers' compensation insurance or reinsurance obligations, that cover medical expenses resulting from an infectious disease;

• (d) Mc denotes the expected average amount payable by insurance or reinsurance undertakings per insured person of country c in case of a pandemic.

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where:

• (a) the sum includes all insured persons i covered by the income protection insurance or reinsurance obligations other than workers' compensation insurance or reinsurance obligations;

• (b) Ei denotes the value of the benefits payable by the insurance or reinsurance undertaking, for the insured person i in case of a permanent work disability caused by an infectious disease. The value of the benefits shall be the sum insured or where the contract provides for recurring benefit payments the best estimate of the benefit payments assuming that the insured person is permanently disabled and will not recover.

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where:

• (a) the sum includes the types of healthcare utilisation h set out in Annex XVI;

• (b) Hh denotes the ratio of insured persons with clinical symptoms utilising healthcare h as set out in Annex XVI;

- (c) CH(h,c) denotes the best estimate of the amounts payable by insurance and reinsurance undertakings for an insured person in country c in relation to medical expense insurance or reinsurance obligations, other than workers' compensation insurance or reinsurance obligations, for healthcare utilisation h in the event of a pandemic.

SECTION 5 Market risk module

Subsection 1 Correlation coefficients

Article 164

• (a) the interest rate risk sub-module referred to in point (a) of subparagraph 2 of Article 105(5) of Directive 2009/138/EC;

• (b) the equity risk sub-module referred to in point (b) of subparagraph 2 of Article 105(5) of Directive 2009/138/EC;

• (c) the property risk sub-module referred to in point (c) of subparagraph 2 of Article 105(5) of Directive 2009/138/EC;

• (d) the spread risk sub-module referred to in point (d) of subparagraph 2 of Article 105(5) of Directive 2009/138/EC;

• (e) the currency risk sub-module referred to in point (e) of subparagraph 2 of Article 105(5) of Directive 2009/138/EC;

• (f) the market risk concentrations sub-module referred to in point (f) of subparagraph 2 of Article 105(5) of Directive 2009/138/EC.

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where:

• (a) the sum covers all possible combinations i,j of sub-modules of the market risk module;

• (b) Corr(i,j) denotes the correlation parameter for market risk for sub-modules i and j;

• (c) SCRi and SCRj denote the capital requirements for sub-modules i and j respectively.

, j) referred to in paragraph 2 shall be equal to the item set out in row i and in column j of the following correlation matrix:

j *i*	Interest rate	Equity	Property	Spread	Concentration	Currency
Interest rate	1	A	A	B	0	0,25
Equity	A	1	0,75	0,75	0	0,25
Property	A	0,75	1	0,5	0	0,25
Spread	B	0,75	0,5	1	0	0,25
Concentration	0	0	0	0	1	0
Currency	0,25	0,25	0,25	0,25	0	1

The parameter A shall be equal to 0 where the capital requirement for interest rate risk set out in Article 165 is the capital requirement referred to in point (a) of that Article. In all other cases, the parameter A shall be equal to 0,5.

The parameter B shall be equal to 0 where the capital requirement for interest rate risk set out in Article 165 is the capital requirement referred to in point (a) of that Article. In all other cases, the parameter B shall be equal to 0,25.

Subsection 1a Qualifying infrastructure investments

Article 164a

Qualifying infrastructure investments

• (a) the cash flows generated by the infrastructure assets allow for all financial obligations to be met under sustained stresses that are relevant for the risks of the project;

• (b) the cash flows that the infrastructure entity generates for debt providers and equity investors are predictable;

• (c) the infrastructure assets and infrastructure entity are governed by a regulatory or contractual framework that provides debt providers and equity investors with a high degree of protection including the following:
• (a) 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, unless one of the following conditions is met:
• (i) the revenues of the infrastructure entity are funded by payments from a large number of users; or
• (ii) the revenues are subject to a rate-of-return regulation;
• (b) the infrastructure 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 or the benefit of security to the extent permitted by applicable law in all assets and contracts that are critical to the operation of the project;
• (ii) the use of net operating cash flows after mandatory payments from the project for purposes other than servicing debt obligations is restricted;
• (iii) restrictions on activities that may be detrimental to debt providers, including that new debt cannot be issued without the consent of existing debt providers in the form agreed with them, unless such new debt issuance is permitted under the documentation for the existing debt; Notwithstanding point (i) of the second subparagraph, for investments in bonds or loans, where undertakings can demonstrate that security in all assets and contracts is not essential for debt providers to effectively protect or recover the vast majority of their investment, other security mechanisms may be used. In that case, the other security mechanisms shall comprise at least one of the following:
• (i) pledge of shares;
• (ii) step-in rights;
• (iii) lien over bank accounts;
• (iv) control over cash flows;
• (v) provisions for assignment of contracts;

• (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 or loans for which a credit assessment by a nominated ECAI is not available, the investment instrument and other pari passu instruments are senior to all other claims other than statutory claims and claims from liquidity facility providers, trustees and 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 entity are located in the EEA or in the OECD;
• (ii) where the infrastructure project 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 entity as a result of the their default,
• — the equity investors are incentivised to protect the interests of investors;
• (iii) where there are construction risks, 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 entity uses tested technology and design;
• (vi) the capital structure of the infrastructure entity allows it to service its debt;
• (vii) the refinancing risk for the infrastructure entity is low;
• (viii) the infrastructure entity uses derivatives only for risk-mitigation purposes.

• (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.

Article 164b

Qualifying infrastructure corporate investments

For the purpose of this Regulation, qualifying infrastructure corporate investment shall include investment in an infrastructure entity that meets the following criteria:

• (1) The substantial majority of the infrastructure entity's revenues is derived from owning, financing, developing or operating infrastructure assets located in the EEA or the OECD;

• (2) The revenues generated by the infrastructure assets satisfy one of the criteria set out in Article 164a(2)(a);

• (3) Where the revenues of the infrastructure 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 entity shall be one of the entities listed in Article 164a(2)(b);

• (4) The revenues shall be diversified in terms of activities, location, or payers, unless the revenues are subject to a rate-of-return regulation in accordance with Article 164a(1)(c)(a)(ii) or a take-or-pay contract or the revenues are availability based;

• (5) 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;

• (6) Where no credit assessment from a nominated ECAI is available for the infrastructure entity:
• (a) the capital structure of the infrastructure corporate shall allow it to service all its debt under conservative assumptions based on an analysis of the relevant financial ratios;
• (b) the infrastructure entity shall have been active for at least three years or, in the case of an acquired business, it shall have been in operation for at least three years;

- (7) Where a credit assessment from a nominated ECAI is available for the infrastructure entity, such credit assessment has a credit quality step between 0 and 3.

Subsection 2 Interest rate risk sub-module

Article 165

General provisions

• (a) the sum of the capital requirements for each currency for the risk of an increase in the term structure of interest rates as set out in Article 166 of this Regulation;

• (b) the sum of the capital requirements for each currency for the risk of a decrease in the term structure of interest rates as set out in Article 167 of this Regulation.

By way of derogation from the first subparagraph, where the domestic currency of a Member State is pegged to the euro, and the basic risk-free interest rate term structure for the euro, adjusted for currency risk, is used to calculate the best estimate with respect to insurance or reinsurance obligations denoted in that currency in accordance with Article 48(1), insurance and reinsurance undertakings may calculate one single capital requirement for the risk of a joint increase or, as applicable, decrease in the term structure of interest rates denominated in euro and that currency.

2. Where the larger of the capital requirements referred to in points (a) and (b) of paragraph 1 and the larger of the corresponding capital requirements calculated in accordance with Article 206(2) are not based on the same scenario, the capital requirement for interest rate risk shall be the capital requirement referred to in points (a) or (b) of paragraph 1 for which the underlying scenario results in the largest corresponding capital requirement calculated in accordance with Article 206(2).

Article 166

Increase in the term structure of interest rates

Image omitted; see official source

Image omitted; see official source

Image omitted; see official source

Image omitted; see official source

where:

• (a) m denotes the maturity in years;

• (b) Image omitted; see official source denotes the increased risk-free interest rate at maturity m;

• (c) rm denotes the current risk-free interest rate at maturity m;

• (d) Image omitted; see official source
• (i) for maturities m lower than one year,

Image omitted; see official source shall be equal to 61 % and

Image omitted; see official source shall be equal to 2,14 %; - (ii) for maturities m expressed in years which are an integer number between 1 and 50 years,

Image omitted; see official source shall take values in accordance with the following table: Maturity m (in years) Image omitted; see official source Image omitted; see official source 1 61 % 2,14  % 2 53 % 1,86  % 3 49 % 1,72  % 4 46 % 1,61  % 5 45 % 1,58  % 6 41 % 1,44  % 7 37 % 1,30  % 8 34 % 1,19  % 9 32 % 1,12  % 10 30 % 1,05  % 11 30 % 1,05  % 12 30 % 1,05  % 13 30 % 1,05  % 14 29 % 1,02  % 15 28 % 0,98  % 16 28 % 0,98  % 17 27 % 0,95  % 18 26 % 0,91  % 19 26 % 0,91  % 20 25 % 0,88  % 21 25 % 0,87  % 22 24 % 0,85  % 23 24 % 0,82  % 24 23 % 0,80  % 25 22 % 0,78  % 26 22 % 0,76  % 27 21 % 0,74  % 28 21 % 0,72  % 29 20 % 0,70  % 30 20 % 0,69  % 31 20 % 0,70  % 32 20 % 0,71  % 33 20 % 0,71  % 34 20 % 0,71  % 35 20 % 0,71  % 36 20 % 0,72  % 37 21 % 0,72  % 38 21 % 0,72  % 39 21 % 0,73  % 40 21 % 0,73  % 41 21 % 0,74  % 42 21 % 0,74  % 43 21 % 0,75  % 44 21 % 0,75  % 45 21 % 0,75  % 46 21 % 0,75  % 47 21 % 0,75  % 48 21 % 0,74  % 49 21 % 0,74  % 50 21 % 0,73  % - (iii) for maturities m of at least 60 years,

Image omitted; see official source shall be equal to 0 %; for maturities of at least 90 years,

Image omitted; see official source shall be equal to 20 %; - (iv) for other maturities m not specified in points (i) to (iii), the values of

Image omitted; see official source and

Image omitted; see official source shall be linearly interpolated.

2a. For a given currency and for maturities larger than the first smoothing point, the increased basic risk-free interest rates shall be derived by applying the extrapolation method referred to in Article 77a of Directive 2009/138/EC to a stressed relevant risk-free interest rate term structure, where that stressed relevant risk-free interest rate term structure is determined by applying the following assumptions:

• (a) the stressed ultimate forward rate shall be equal to the sum of 15 basis points and the current ultimate forward rate;

• (b) the stress to the last liquid forward rates shall be determined by applying the weights used for the determination of the current last liquid forward rate referred to in Article 46(1c) to the stresses applied to the interest rates corresponding to maturities referred to in points (a) and (b) of that Article, under the assumption that paragraph 2 of this Article applies to those maturities.

Article 167

Decrease in the term structure of interest rates

In any case, no decreased basic risk-free interest rate shall be lower than a term-dependent floor. The floor shall be determined as follows:

• (a) for maturities between 1 and 7 years, the floor shall be equal to – 1,25 %;

• (b) for maturities of at least 20 years, the floor shall be equal to – 0,893 %;

• (c) for maturities between 7 years and 20 years, the floor shall be linearly interpolated.

Image omitted; see official source

Image omitted; see official source

Image omitted; see official source

Image omitted; see official source

where:

- (a) m denotes the maturity in years;

- (b) Image omitted; see official source denotes the decreased risk-free interest rateat maturity m;

• (c) rm denotes the current risk-free interest rate at maturity m;

• (d) Image omitted; see official source Image omitted; see official source
• (i) for maturities m lower than one year,

Image omitted; see official source shall be equal to 58 % and

Image omitted; see official source shall be equal to 1,16 %; - (ii) for maturities m expressed in years which are an integer number between 1 and 50 years,

Image omitted; see official source and

Image omitted; see official source shall take values in accordance with the following table: Maturity m (in years) Image omitted; see official source Image omitted; see official source 1 58 % 1,16  % 2 51 % 0,99  % 3 44 % 0,83  % 4 40 % 0,74  % 5 40 % 0,71  % 6 38 % 0,67  % 7 37 % 0,63  % 8 38 % 0,62  % 9 39 % 0,61  % 10 40 % 0,61  % 11 41 % 0,60  % 12 42 % 0,60  % 13 43 % 0,59  % 14 44 % 0,58  % 15 45 % 0,57  % 16 47 % 0,56  % 17 48 % 0,55  % 18 49 % 0,54  % 19 49 % 0,52  % 20 50 % 0,50  % 21 49 % 0,49  % 22 50 % 0,49  % 23 51 % 0,48  % 24 51 % 0,48  % 25 52 % 0,47  % 26 52 % 0,46  % 27 53 % 0,45  % 28 53 % 0,44  % 29 53 % 0,42  % 30 53 % 0,41  % 31 53 % 0,40  % 32 53 % 0,39  % 33 54 % 0,37  % 34 54 % 0,36  % 35 54 % 0,35  % 36 54 % 0,34  % 37 55 % 0,33  % 38 55 % 0,32  % 39 56 % 0,31  % 40 57 % 0,30  % 41 57 % 0,29  % 42 58 % 0,28  % 43 59 % 0,27  % 44 61 % 0,26  % 45 62 % 0,25  % 46 62 % 0,23  % 47 63 % 0,22  % 48 64 % 0,21  % 49 64 % 0,19  % 50 65 % 0,18  % - (iii) for maturities m of at least 60 years,

Image omitted; see official source shall be equal to 0 %; for maturities of at least 90 years,

Image omitted; see official source shall be equal to 20 %; - (iv) for other maturities m not specified in points (i) to (iii), the values of

Image omitted; see official source and

Image omitted; see official source shall be linearly interpolated.

2a. For a given currency and for maturities larger than the first smoothing point, the decreased basic risk-free interest rates shall be derived by applying the extrapolation method referred to in Article 77a of Directive 2009/138/EC to a stressed relevant risk-free interest rate term structure, where the stressed relevant risk-free interest rate term structure is determined by applying the following assumptions:

• (a) the stressed ultimate forward rate shall be equal to the difference between the current ultimate forward rate and 15 basis points;

• (b) the stress to the last liquid forward rates shall be determined by applying the weights used for the determination of the current last liquid forward rate referred to in Article 46(1c) to the stresses applied to the interest rates corresponding to maturities referred to in points (a) and (b) of that Article under the assumption that paragraph 2 of this Article applies to those maturities.

Subsection 3 Equity risk sub-module

Article 168

General provisions

3a. Qualifying infrastructure equities shall comprise equity investments in infrastructure project entities that meet the criteria set out in Article 164a.

3b. Qualifying infrastructure corporate equities shall comprise equity investments in infrastructure entities that meet the criteria set out in Article 164b.

Image omitted; see official source

where:

• (a) SCRequ1 denotes the capital requirement for type 1 equities;

• (b) SCRequ2 denotes the capital requirement for type 2 equities;

• (c) SCRquinf denotes the capital requirement for qualifying infrastructure equities;

• (d) SCRquinfc denotes the capital requirement for qualifying infrastructure corporate equities.

• (a) equities, other than qualifying infrastructure equities or qualifying infrastructure corporate equities, held within collective investment undertakings which are qualifying social entrepreneurship funds as referred to in Article 3(b) of Regulation (EU) No 346/2013 of the European Parliament and of the Council ([^E0013]) where the look-through approach set out in Article 84 of this Regulation is possible for all exposures within the collective investment undertaking, or units or shares of those funds where the look through approach is not possible for all exposures within the collective investment undertaking;