S.I. No. 485/2015 - European Union (Insurance and Reinsurance) Regulations 2015

• (c) an undertaking controlled by the same person, whether natural or legal, who controls an insurance undertaking or reinsurance undertaking authorised in the other Member State.

• (2) The Bank shall consult the authority of the other Member State involved which is responsible for the supervision of credit institutions or investment firms prior to the granting of an authorisation to an insurance undertaking or reinsurance undertaking which is—

• (a) a subsidiary undertaking of a credit institution or investment firm authorised in the European Union,

• (b) a subsidiary undertaking of the parent undertaking of a credit institution or investment firm authorised in the European Union, or

• (c) an undertaking controlled by the same person, whether natural or legal, who controls a credit institution or investment firm authorised in the European Union.

• (3) The Bank shall consult with the authorities referred to in paragraphs (1) and (2) in particular when assessing the suitability of the shareholders and the fit and proper requirements of all persons who effectively run the undertaking or have other key functions involved in the management of another entity which is a member of the same group.

• (4) Information regarding the suitability of shareholders and the fit and proper requirements of all persons who effectively run the undertaking or have other key functions shall be exchanged between the Bank and the authorities referred to in paragraphs (1) and (2) where it is of relevance to the other authority for the granting of an authorisation as well as for the ongoing assessment of compliance with operating conditions.

Decision on application for authorisation

• (2) Where the Bank decides to refuse an application for authorisation it shall notify its decision to the applicant and shall in the notification specify the grounds for its decision.

• (3) A decision of the Bank refusing an application for an authorisation is an appealable decision for the purposes of Part VIIA of the Act of 1942.

• (4) A failure by the Bank to deal with a complete application for an authorisation within the period of 6 months beginning with the date on which it received the application is an appealable decision for the purposes of Part VIIA of the Act of 1942, and for this purpose an application is “complete” if it fully complies with Regulation 14(2).

Notification of authorisation to EIOPA

Power to impose conditions

• (2) The Bank may, from time to time, by notice in writing given to an insurance undertaking or reinsurance undertaking, vary or revoke a condition imposed on the undertaking under paragraph (1) (including one previously varied under this paragraph).

• (3) In imposing or varying a condition under this Regulation, the Bank shall ensure that the condition, or the condition as varied, is consistent with the objects of these Regulations.

• (4) A decision of the Bank imposing or varying a condition under this Regulation is an appealable decision for the purposes of Part VIIA of the Act of 1942.

Part 3 SUPERVISION

Main objective of supervision

Financial stability and pro-cyclicality

• (2) In times of exceptional movements in the financial markets, the Bank shall take into account the potential pro-cyclical effects of its actions.

General principles of supervision

• (2) The Bank shall verify on a continuous basis the proper operation of insurance business or reinsurance business and compliance with supervisory provisions by insurance undertakings and reinsurance undertakings.

• (3) The supervision of insurance undertakings and reinsurance undertakings by the Bank shall comprise an appropriate combination of off site activities and on site inspections.

• (4) The Bank shall apply the requirements laid down in these Regulations in a manner which is proportionate to the nature, scale and complexity of the risks inherent in the business of any insurance undertaking or reinsurance undertaking.

Scope of supervision

• (2) For the purposes of paragraph (1) financial supervision shall include verification, with respect to the entire business of an insurance undertaking or reinsurance undertaking, of its state of solvency, of the establishment of technical provisions, of its assets and of the eligible own funds, in accordance with these Regulations and other laws applicable in the State.

• (3) Where an insurance undertaking is authorised to cover the risks classified in class 18 in Part 1 of Schedule 1, the Bank’s supervision shall extend to monitoring of the technical resources which the insurance undertaking has at its disposal for the purpose of carrying out the assistance operations it has undertaken to perform.

• (4) If—

• (a) an insurance undertaking or reinsurance undertaking authorised in a Member State other than the State is carrying on business in the State, and

• (b) the Bank believes on reasonable grounds that the activities of the undertaking might affect the undertaking’s financial soundness,

the Bank shall, without delay, notify its belief to the supervisory authority of the home Member State.

• (5) If an insurance undertaking or reinsurance undertaking is carrying on business in a Member State other than the State and—

• (a) in the case of an insurance undertaking, the supervisory authority of the Member State in which the risk is situated, or the Member State of the commitment, or

• (b) in the case of a reinsurance undertaking, the supervisory authority of the host Member State,

notifies the Bank of its belief that the activities of the undertaking may affect its financial soundness, the Bank shall determine whether the undertaking is complying with the prudential principles in these Regulations.

Transparency and accountability

• (a) the text of laws, administrative rules and general guidance in the field of insurance regulation;

• (b) the general criteria and methods, including the tools to be used in the supervisory review process;

• (c) aggregate statistical data on key aspects of the application of the prudential framework;

• (d) the manner of exercise of the options provided for in these Regulations;

• (e) the objectives of the supervision provided for by these Regulations and its main functions and activities.

• (2) The Bank shall comply with paragraph (1) in such a way as to enable a comparison with the supervisory approaches adopted by the supervisory authorities of the other Member States.

• (3) The Bank shall publish and regularly update the information specified in paragraph (1) in a common format that is accessible at a single electronic location.

Prohibition of refusal of reinsurance and retrocession contracts

• (2) The Bank shall not refuse a retrocession contract concluded by a reinsurance undertaking with a reinsurance undertaking or another insurance undertaking on grounds directly related to the financial soundness of that reinsurance undertaking or insurance undertaking.

Supervision of branches established in another Member State

• (2) If an insurance undertaking or reinsurance undertaking carries on business through a branch in a Member State other than the State, in accordance with Article 33 of the Directive, the Bank may, after having informed the supervisory authority of the host Member State, carry out itself, or by persons appointed for the purpose, on site verifications of the information necessary to ensure the financial supervision of the undertaking and the supervisory authority of the host Member State may participate in those verifications.

Information to be provided for supervisory purposes

• (2) The information referred to in paragraph (1), when being submitted in accordance with the supervisory review process, shall include at least the information necessary to enable the Bank—

• (a) to assess the system of governance applied by the undertaking, the business it is pursuing, the valuation principles applied for solvency purposes, the risks faced and the risk management systems, and its capital structure, needs and managements, and

• (b) to make any appropriate decisions resulting from the exercise of its supervisory functions.

• (3) Without prejudice to the powers of the Bank under financial services legislation, the Bank shall exercise those powers—

• (a) to determine the nature, the scope and the format of the information referred to in paragraphs (1) and (2) which it requires insurance undertakings and reinsurance undertakings to submit at the following points in time:

• (i) at predefined periods;

• (ii) on the occurrence of predefined events;

• (iii) during enquiries regarding the situation of an insurance undertaking or reinsurance undertaking,

• (b) to obtain any information regarding contracts which are held by intermediaries or regarding contracts which are entered into with third parties, and

• (c) to require information from external experts, including auditors and actuaries.

• (4) The information referred to in paragraphs (1) to (3) shall—

• (a) consist of—

• (i) qualitative or quantitative elements (or both),

• (ii) historic, current or prospective elements (or more than one of those), and

• (iii) data from internal or external sources (or both), and

• (b) comply with the following:

• (i) it reflects the nature, scale and complexity of the undertaking, and in particular the risks inherent in the business;

• (ii) it is accessible, complete in all material respects, comparable and consistent over time;

• (iii) it is relevant, reliable and comprehensible.

• (5) Insurance undertakings and reinsurance undertakings shall have appropriate systems and structures in place to fulfil any information requirement, howsoever described, made by the Bank where necessary for the purpose of supervision under these Regulations as well as a written policy, approved by its board of directors, ensuring the on-going appropriateness of the information provided.

• (6) Without prejudice to Regulation 140(6) to (8), where the predefined periods referred to in paragraph (3)(a)(i) are shorter than one year, the Bank may limit regular supervisory reporting where—

• (a) the provision of that information would be overly burdensome in relation to the nature, scale and complexity of the risks inherent in the business of the undertaking, and

• (b) the information is reported at least annually.

• (7) The Bank shall not limit regular supervisory reporting with a frequency shorter than one year in the case of an insurance undertaking or reinsurance undertaking that is part of a group, unless the undertaking can demonstrate to the satisfaction of the Bank that regular supervisory reporting with a frequency shorter than one year is inappropriate, given the nature, scale and complexity of the risks inherent in the group.

• (8) The limitation to regular supervisory reporting shall be granted only to undertakings that do not represent more than 20% of the State’s life and non-life insurance and reinsurance market respectively, where the non-life insurance market share is based on gross written premiums and the life insurance market share is based on gross technical provisions.

• (9) The Bank shall give priority to the smallest undertakings when determining the eligibility of the undertakings for those limitations.

• (10) The Bank may limit regular supervisory reporting or exempt an insurance undertaking or reinsurance undertaking from reporting on an item-by-item basis where—

• (a) the provision of that information would be overly burdensome in relation to the nature, scale and complexity of the risks inherent in the business of the undertaking,

• (b) the submission of that information is not necessary for the effective supervision of the undertaking,

• (c) the exemption does not undermine the stability of the financial systems concerned in the European Union, and

• (d) the undertaking is able to provide the information on an ad-hoc basis.

• (11) The Bank shall not exempt from reporting on an item-by-item basis an insurance undertaking or reinsurance undertaking that is part of a group, unless the undertaking can demonstrate to the satisfaction of the Bank that reporting on an item-by-item basis is inappropriate, given the nature, scale and complexity of the risks inherent in the business of the group and taking into account the objective of financial stability.

• (12) The exemption from reporting on an item-by-item basis shall be granted only to undertakings that do not represent more than 20% of the State’s life and non-life insurance or reinsurance market respectively, where the non-life insurance market share is based on gross written premiums and the life insurance market share is based on gross technical provisions.

• (13) The Bank shall give priority to the smallest undertakings when determining the eligibility of the undertakings for those exemptions.

• (14) For the purposes of paragraphs (6) and (10), as part of the supervisory review process, the Bank shall assess whether the submission of information would be overly burdensome in relation to the nature, scale and complexity of the risks of the undertaking, taking into account, at least—

• (a) the volume of premiums, technical provisions and assets of the undertaking,

• (b) the volatility of the claims and benefits covered by the undertaking,

• (c) the market risks that the investments of the undertaking give rise to,

• (d) the level of risk concentrations,

• (e) the total number of classes of life and non-life insurance for which authorisation is granted,

• (f) possible effects of the management of the assets of the undertaking on financial stability,

• (g) the systems and structures of the undertaking to provide information for supervisory purposes and the written policy referred to in paragraph (5),

• (h) the appropriateness of the system of governance of the undertaking,

• (i) the level of own funds covering the Solvency Capital Requirement and the Minimum Capital Requirement, and

• (j) whether the undertaking is a captive insurance undertaking or captive reinsurance undertaking only covering risks associated with the industrial or commercial group to which it belongs.

Annual and quarterly information etc.: transitional deadlines

(a)20 weeks after the end of the undertaking’s financial year ending on or after 30 June 2016 but before 1 January 2017,

(b)18 weeks after the end of the undertaking’s financial year ending on or after 1 January 2017 but before 1 January 2018,

(c)16 weeks after the end of the undertaking’s financial year ending on or after 1 January 2018 but before 1 January 2019, and

(d)14 weeks after the end of the undertaking’s financial year ending on or after 1 January 2019 but before 1 January 2020.

• (2) An insurance undertaking or reinsurance undertaking shall submit its quarterly quantitative templates no later than—

(a)8 weeks after the end of any quarter ending on or after 1 January 2016 but before 1 January 2017,

(b)7 weeks after the end of any quarter ending on or after 1 January 2017 but before 1 January 2018,

(c)6 weeks after the end of any quarter ending on or after 1 January 2018 but before 1 January 2019, and

(d)5 weeks after the end of any quarter ending on or after 1 January 2019 but before 1 January 2020.

Directors’ accuracy certificates

• (2) Insurance undertakings and reinsurance undertakings shall annex to each own risk and solvency assessment report and each regular supervisory report or annual summary of the regular supervisory report a directors’ accuracy certificate attesting the accuracy of the information submitted in the reports which shall be submitted in a form specified by the Bank from time to time.

• (3) At least 2 directors and the chief executive of the undertaking shall sign a directors’ accuracy certificate.

Auditor’s report

• (2) The report referred to in paragraph (1) shall include a reasonable assurance opinion on the elements of the report on the solvency and financial condition of the undertaking as referred to in Regulation 52 relevant to the balance sheet, own funds and capital requirements.

• (3) Such elements of the quantitative information to be submitted by a participating insurance undertaking or participating reinsurance undertaking, an insurance holding company or a mixed financial holding company (as referred to in Regulation 216(3)(a) and (b)) under financial services legislation and other laws applicable in the State adopted pursuant to the Directive as may from time to time be specified by notice in writing by the Bank shall be audited by a person duly qualified under the Act of 2014 who shall make a report to the Bank in a form specified by the Bank from time to time.

• (4) The report referred to in paragraph (3) shall include a reasonable assurance opinion on the elements of the report on the solvency and financial condition of the participating insurance undertaking or reinsurance undertaking, insurance holding company or mixed financial holding company as referred to in Regulation 258 relevant to the balance sheet, own funds and capital requirements.

Supervisory review process

• (2) The review and evaluation shall comprise the assessment of the qualitative requirements relating to the system of governance, the assessment of the risks which the undertaking faces or may face and the assessment of the ability of the undertaking to assess its risks taking into account the environment in which it is operating.

• (3) The Bank shall in particular review and evaluate compliance with the following:

• (a) the system of governance, including the own risk and solvency assessment, as set out in Regulations 44 to 51;

• (b) the technical provisions as set out in Regulations 83 to 101;

• (c) the quality and quantity of own funds as set out in Regulations 102 to 112;

• (d) the capital requirements as set out in Regulations 113 to 140;

• (e) where the undertaking uses a full or partial internal model, ongoing compliance with the requirements for full and partial internal models set out in Regulations 125 to 138;

• (f) the investment rules as set out in Regulations 141 to 143.

• (4) The Bank shall have in place appropriate monitoring tools that enable it to identify deteriorating financial conditions in the undertaking and to monitor how that deterioration is remedied.

• (5) The Bank shall assess the adequacy of the methods and practices of the undertaking designed to identify possible events or future changes in economic conditions that could have adverse effects on its overall financial standing.

• (6) The Bank shall assess the ability of the undertaking to withstand those possible events or future changes in economic conditions.

• (7) The Bank shall conduct the reviews, evaluations and assessments referred to in paragraphs (1), (3), (5) and (6) (referred to in these Regulations as “the supervisory review process”) regularly and establish the minimum frequency and the scope of those reviews, evaluations and assessments having regard to the nature, scale and complexity of the activities of the undertaking.

Capital add-on

• (2) For the purposes of paragraph (1) exceptional circumstances exist where—

• (a) the Bank concludes that the risk profile of the undertaking deviates significantly from the assumptions underlying the Solvency Capital Requirement, as calculated using the standard formula in accordance with Regulations 116 to 124 and either—

• (i) the requirement to use an internal model under Regulation 131 is inappropriate or has been ineffective, or

• (ii) a partial or full internal model is being developed in accordance with Regulation 131,

• (b) the Bank concludes that the risk profile of the undertaking deviates significantly from the assumptions underlying the Solvency Capital Requirement, as calculated using an internal model or partial internal model in accordance with Regulations 125 to 138, because certain quantifiable risks are captured insufficiently and the adaptation of the model to better reflect the given risk profile has failed within an appropriate timeframe,

• (c) the Bank concludes that the system of governance of the undertaking deviates significantly from the standards laid down in Regulations 44 to 51, that those deviations prevent it from being able to properly identify, measure, monitor, manage and report the risks that it is or could be exposed to and that the application of other measures is in itself unlikely to improve the deficiencies sufficiently within an appropriate timeframe, or

• (d) the undertaking applies the matching adjustment referred to in Regulation 86, the volatility adjustment referred to in Regulation 88 or the transitional measures referred to in Regulations 99 and 100 and the Bank concludes that the risk profile of the undertaking deviates significantly from the assumptions underlying those adjustments and transitional measures.

• (3) A direction imposed pursuant to paragraph (1) shall be in writing and shall specify the grounds for the direction.

• (4) In the circumstances set out in subparagraphs (a) and (b) of paragraph (2) the capital add-on shall be calculated in such a way as to ensure that the undertaking complies with Regulation 114(3) to (5).

• (5) In the circumstances set out in subparagraph (c) of paragraph (2) the capital add-on shall be proportionate to the material risks arising from the deficiencies which gave rise to the decision of the Bank to set the add on.

• (6) In the circumstances set out in subparagraph (d) of paragraph (2) the capital add-on shall be proportionate to the material risks arising from the deviation referred to in that sub-paragraph.

• (7) In the cases set out in subparagraphs (b) and (c) of paragraph (2) the Bank shall ensure that the undertaking makes every effort to remedy the deficiencies that led to the imposition of the capital add-on.

• (8) The capital add-on shall be reviewed at least once a year by the Bank and shall be revoked when the exceptional circumstances specified in paragraph (2) are no longer applicable.

• (9) The Solvency Capital Requirement including the capital add-on imposed shall replace the inadequate Solvency Capital Requirement.

• (10) Despite paragraph (9) the Solvency Capital Requirement shall not include the capital add-on imposed in accordance with paragraph (2)(c) for the purposes of the calculation of the risk margin referred to in Regulation 84(9) to (11).

Supervision of outsourced functions and activities

• (a) the service provider co-operates with the Bank in connection with the outsourced function or activity,

• (b) the undertaking, its auditors and the Bank have effective access to data related to the outsourced function or activity, and

• (c) the Bank has effective access to the business premises of the service provider and is able to exercise that right of access.

• (2) Where the service provider is located in a Member State other than the State, in accordance with Article 38(2) of the Directive, the Bank shall have the right to carry out itself, or through the intermediary of persons it appoints for the purpose, on-site inspections at the premises of the service provider and shall inform the appropriate authority of that Member State before conducting an on site inspection.

• (3) In circumstances where the service provider is a non-supervised entity the Bank shall inform the supervisory authority in the Member State in question.

• (4) The Bank may delegate the carrying out of an on-site inspection under paragraph (2) to the appropriate authority of the Member State where the service provider is located.

• (5) Where an insurance undertaking or reinsurance undertaking authorised in a Member State other than the State outsources a function or an insurance or reinsurance activity to a service provider located in the State, the supervisory authorities of the undertaking shall be permitted to carry out themselves, or though the intermediary of persons they appoint for the purpose, on-site inspections at the premises of the service provider and shall inform the appropriate authority of the service provider in the State before carrying out the on-site inspection.

• (6) In circumstances where the service provider is a non-supervised entity the appropriate authority shall be the Bank.

• (7) The supervisory authority may delegate the carrying out of an on site inspection under paragraph (5) to the Bank.

Transfer of insurance portfolio

• (2) Where a branch, established in another Member State, whose head office is situated in the State, proposes to transfer all or part of its portfolio of contracts, the Bank shall consult the supervisory authority of the Member State of the branch.

• (3) A transfer shall not be effected unless—

• (a) the supervisory authority of the home Member State of the accepting undertaking certifies that, after taking the transfer into account, the accepting undertaking possesses the necessary eligible own funds to cover the Solvency Capital Requirement referred to in Regulation 113, and

• (b) the supervisory authorities of every Member State where the contracts were concluded, either under the right of establishment or the freedom to provide services, and (in a case within paragraph (2)) the supervisory authority of the Member State in which the branch is situated, have consented.

• (4) The Bank shall consult the supervisory authorities referred to in paragraph (3)(b) before the transfer to obtain their opinion or consent, and the absence of any response by a supervisory authority within 3 months of being consulted shall be deemed to be consent by that supervisory authority.

• (5) Without prejudice to the requirements of section 13(3)(a) of the Assurance Companies Act 1909 , a transfer in accordance with this Regulation shall be published—

• (a) prior to the transfer being authorised, by advertisement once in each of 2 daily newspapers published in the State, and

• (b) in each Member State in which the risks are situated or which is the Member State of the commitment in accordance with the law of that Member State.

• (6) Where the Bank is consulted by the supervisory authority of a Member State pursuant to Article 39 of the Directive, the Bank shall provide an opinion or consent within 3 months of being consulted and the absence of any response within that period from the Bank shall be deemed to be consent.

• (7) Where—

• (a) a transfer is to be effected under the law of a Member State other than the State in accordance with Article 39 of the Directive, and

• (b) the State is a Member State in which the risk is situated or is a Member State of the commitment,

the transfer shall, prior to being authorised, be published by advertisement once in Iris Oifigiúil and once in each of 2 daily newspapers published in the State.

• (8) A transfer in accordance with this Regulation shall automatically be valid against policy holders, insured persons and any other persons having rights or obligations arising out of the contracts transferred.

Transfer of reinsurance portfolio

• (2) A reinsurance undertaking whose head office is in the State shall not acquire a portfolio of reinsurance contracts held by another reinsurance undertaking (whether having its head office in the State or another Member State) unless it has obtained from the Bank a certificate to the effect that, after taking the acquisition into account, the accepting undertaking possesses the necessary eligible own funds to cover the Solvency Capital Requirement referred to in Regulation 113.

• (3) In this Regulation—

“portfolio of reinsurance contracts” includes contracts entered into under the right of establishment or the freedom to provide services in a Member State, and includes a part of a portfolio;

“reinsurance contracts” means reinsurance contracts transacted by a reinsurance undertaking in the course of carrying on a reinsurance business.

Part 4 CONDITIONS GOVERNING BUSINESS

Chapter 1 Responsibilities of board of directors

Responsibility of board of directors

Chapter 2 System of governance

General governance requirements

• (2) The system of governance shall include at least—

• (a) an adequate transparent organisational structure with a clear allocation and appropriate segregation of responsibilities,

• (b) an effective system for ensuring the transmission of information, and

• (c) compliance with the requirements laid down in Regulations 45 to 51.

• (3) The system of governance shall be subject to regular internal review.

• (4) The system of governance shall be proportionate to the nature, scale and complexity of the operations of the undertaking.

• (5) The undertaking shall have written policies in place to cover at least risk management, internal control, internal audit and, where relevant, outsourcing and shall ensure that those policies are implemented.

• (6) The undertaking shall review the policies at least annually.

• (7) The policies and amendments of the policies (other than minor ones) shall be subject to prior approval by the board of directors.

• (8) The policies shall be adapted in view of any significant changes.

• (9) The undertaking shall take reasonable steps to ensure continuity and regularity in the performance of its activities, including the development of contingency plans and for that purpose it shall employ appropriate and proportionate systems, resources and procedures.

• (10) The Bank shall, where it considers it appropriate to do so, exercise its powers under financial services legislation to verify the system of governance of the undertaking and to evaluate emerging risks identified by the undertaking itself which may affect its financial soundness.

• (11) The Bank shall, where it considers it appropriate to do so, exercise its powers under financial services legislation to require the undertaking to improve and strengthen its system of governance to ensure compliance with the requirements set out in Regulations 45 to 51.

Fit and proper requirements

• (a) a person ceases to perform a pre-approval controlled function, as defined in section 22 of the Act of 2010, which the person had been previously appointed by the undertaking to perform, or

• (b) a person who performs a pre-approval controlled function has been replaced because the person no longer complies with any standard of fitness and probity in a code issued by the Bank under section 50 of that Act.

Risk management

• (2) The risk management system shall be effective and well integrated into the organisational structure and decision-making processes of the undertaking with proper consideration of the persons who effectively run the undertaking or have other key functions.

• (3) The risk management system shall cover the risks that are included in the calculation of the Solvency Capital Requirement as set out in Regulation 114(6) and (7) as well as the risks which are not, or are not fully, included in the calculation of it.

• (4) The risk management system shall cover at least the following areas:

• (a) underwriting and reserving;

• (b) asset–liability management;

• (c) investment, in particular derivatives and similar commitments;

• (d) liquidity and concentration risk management;

• (e) operational risk management;

• (f) reinsurance and other risk-mitigation techniques.

• (5) The written policy on risk management referred to in Regulation 44(5) shall comprise policies relating to the matters specified in paragraph (4)(a) to (f).

• (6) An insurance undertaking or reinsurance undertaking which applies the matching adjustment referred to in Regulation 86 or the volatility adjustment referred to in Regulation 88, shall set up a liquidity plan projecting the incoming and outgoing cash flows in relation to the assets and liabilities subject to those adjustments.

• (7) As regards asset-liability management, the undertaking shall regularly assess—

• (a) the sensitivity of its technical provisions and eligible own funds to the assumptions underlying the extrapolation of the relevant risk-free interest rate term structure referred to in Regulation 85,

• (b) where the matching adjustment referred to in Regulation 86 is applied—

• (i) the sensitivity of its technical provisions and eligible own funds to the assumptions underlying the calculation of the matching adjustment, including the calculation of the fundamental spread referred to in Regulation 87(1)(b), and the possible effect of a forced sale of assets on its eligible own funds,

• (ii) the sensitivity of its technical provisions and eligible own funds to changes in the composition of the assigned portfolio of assets, and

• (iii) the impact of a reduction of the matching adjustment to zero, and

• (c) where the volatility adjustment referred to in Regulation 88 is applied—

• (i) the sensitivity of its technical provisions and eligible own funds to the assumptions underlying the calculation of the volatility adjustment and the possible effect of a forced sale of assets on its eligible own funds, and

• (ii) the impact of a reduction of the volatility adjustment to zero.

• (8) The undertaking shall submit the assessments referred to in paragraph (7) to the Bank annually as part of the information required to be submitted to the Bank under financial services legislation.

• (9) Where the reduction of the matching adjustment or the volatility adjustment to zero would result in non-compliance with the Solvency Capital Requirement, the undertaking shall also submit an analysis of the measures it could apply in such a situation to re-establish the level of eligible own funds covering the Solvency Capital Requirement or to reduce its risk profile to restore compliance with the Solvency Capital Requirement.

• (10) Where the volatility adjustment referred to in Regulation 88 is applied, the written policy on risk management referred to in Regulation 44(5) shall comprise a policy on the criteria for the application of the volatility adjustment.

• (11) As regards investment risk, the undertaking shall demonstrate that it complies with Regulations 141 and 142.

• (12) The undertaking shall provide for a risk management function which shall be structured in such a way as to facilitate the implementation of the risk management system.

• (13) In order to avoid overreliance on external credit assessment institutions when the undertaking uses an external credit rating assessment in the calculation of technical provisions or the Solvency Capital Requirement, the undertaking shall assess the appropriateness of those external credit assessments as part of its risk management by using additional assessments wherever practicably possible in order to avoid any automatic dependence on external assessments.

• (14) Where the undertaking uses a partial or full internal model approved in accordance with Regulations 125 and 126 the risk management function shall cover the following additional tasks:

• (a) to design and implement the internal model;

• (b) to test and validate the internal model;

• (c) to document the internal model and any subsequent changes made to it;

• (d) to analyse the performance of the internal model and to produce summary reports of it;

• (e) to inform the board of directors about the performance of the internal model, suggesting areas needing improvement, and providing updates on the status of efforts to improve previously identified weaknesses.

Own risk and solvency assessment

• (2) The assessment shall include at least the following:

• (a) the overall solvency needs taking into account the specific risk profile, approved risk tolerance limits and the business strategy of the undertaking;

• (b) the compliance, on a continuous basis, with the capital requirements, as laid down in Regulations 113 to 140, and with the requirements regarding technical provisions, as laid down in Regulations 83 to 101;

• (c) the significance with which the risk profile of the undertaking deviates from the assumptions underlying the Solvency Capital Requirement as laid down in Regulation 114(3) to (5), calculated with the standard formula in accordance with Regulations 116 to 124 or with its partial or full internal model in accordance with Regulations 125 to 138.

• (3) For the purposes of paragraph (2)(a), the undertaking shall have in place processes which are proportionate to the nature, scale and complexity of the risks inherent in its business and which enable it to properly identify and assess the risks it faces in the short and long term and to which it is or could be exposed.

• (4) The undertaking shall be able to demonstrate to the Bank the methods used in the assessment under paragraph (3).

• (5) Where the undertaking applies the matching adjustment referred to in Regulation 86, the volatility adjustment referred to in Regulation 88 or the transitional measures referred to in Regulations 99 and 100, it shall perform the assessment of compliance with the capital requirements referred to in paragraph (2)(b) with and without taking into account those adjustment and transitional measures.

• (6) For the purposes of paragraph (2)(c), when an internal model is used, the assessment shall be performed together with the recalibration that transforms the internal risk numbers into the Solvency Capital Requirement risk measure and calibration.

• (7) The assessment shall be an integral part of the business strategy of the undertaking and shall be taken into account on an ongoing basis in the strategic decisions of the undertaking.

• (8) The undertaking shall perform the assessment regularly and without any delay following any significant change in its risk profile.

• (9) The undertaking shall provide the Bank with the results of each assessment in such form and manner as may be specified by the Bank as part of the information required to be provided to the Bank under financial services legislation.

• (10) The assessment shall not serve to calculate a capital requirement for the undertaking and the Solvency Capital Requirement of the undertaking shall be adjusted only in accordance Regulations 39, 234 to 237 and 241.

Internal control

• (2) The system shall include administrative and accounting procedures, an internal control framework, appropriate reporting arrangements at all levels of the undertaking and a compliance function.

• (3) The compliance function shall include—

• (a) advising the board of directors on compliance with these Regulations and other laws applicable in the State adopted pursuant to the Directive, and

• (b) an assessment of the possible impact of any changes to laws applicable in the State on the operations of the undertaking and the identification and assessment of compliance risk.

Internal audit

• (2) The undertaking’s internal audit function shall include an evaluation of the adequacy and effectiveness of the internal control system and other elements of the system of governance.

• (3) The undertaking’s internal audit function shall be objective and independent from its operational functions.

• (4) Any findings and recommendations of the internal audit shall be reported to the board of directors which shall determine what actions are to be taken with respect to each of the internal audit findings and recommendations and shall ensure that those actions are carried out.

Actuarial function

• (a) to coordinate the calculation of technical provisions,

• (b) to ensure the appropriateness of the methodologies and underlying models used as well as the assumptions made in the calculation of technical provisions,

• (c) to assess the sufficiency and quality of the data used in the calculation of technical provisions,

• (d) to compare best estimates against experience,

• (e) to inform the board of directors of the reliability and adequacy of the calculation of technical provisions,

• (f) to oversee the calculation of technical provisions in the cases set out in Regulation 95,

• (g) to express an opinion on the overall underwriting policy,

• (h) to express an opinion on the adequacy of reinsurance arrangements, and

• (i) to contribute to the effective implementation of the risk management system referred to in Regulation 46 in particular with respect to the risk modelling underlying the calculation of the capital requirements set out in Regulations 113 to 140 and with respect to the assessment referred to in Regulation 47.

• (2) The actuarial function shall be carried out by persons who have knowledge of actuarial and financial mathematics, commensurate with the nature, scale and complexity of the risks inherent in the business of the undertaking, and who are able to demonstrate their relevant experience with applicable professional and other standards.

Outsourcing

• (2) Where an undertaking outsources critical or important operational functions or activities, it shall not be done in such a way as to lead to any of the following:

• (a) materially impairing the quality of the system of governance of the undertaking;

• (b) unduly increasing the operational risk;

• (c) impairing the ability of the Bank to monitor the compliance of the undertaking with its obligations;

• (d) undermining continuous and satisfactory service to policy holders.

• (3) An undertaking shall, in a timely manner, notify the Bank—

• (a) before outsourcing critical or important functions or activities, and

• (b) regarding the occurrence of subsequent material developments with respect to those functions or activities.

Chapter 3 Public disclosure

Report on solvency and financial condition: contents

• (a) include the information required in Regulation 34(4)(a) and comply with the principles set out in Regulation 34(4)(b), and

• (b) contain the information specified in paragraph (2), either in full or, subject to Regulation 55(3), by way of reference to equivalent information, both in nature and scope, published under other legal or regulatory requirements.

• (2) The information referred to in paragraph (1)(b) is—

• (a) a description of the business and performance of the undertaking,

• (b) a description of the system of governance of the undertaking and an assessment of its adequacy for the risk profile of the undertaking,

• (c) a description, separately for each category of risk, of the risk exposure, concentration, mitigation and sensitivity,

• (d) a description, separately for assets, technical provisions and other liabilities, of the bases and methods used for their valuation, together with an explanation of any major differences in the bases and methods used for their valuation in financial statements, and

• (e) a description of the capital management, including the following:

• (i) the structure and amount of own funds, and their quality;

• (ii) the amounts of the Solvency Capital Requirement and of the Minimum Capital Requirement;

• (iii) information allowing a proper understanding of the main differences between the underlying assumptions of the standard formula and those of any internal model used by the undertaking for the calculation of its Solvency Capital Requirement;

• (iv) the amount of any non-compliance with the Minimum Capital Requirement or any significant non-compliance with the Solvency Capital Requirement during the reporting period, even if subsequently resolved, with an explanation of its origin and consequences as well as any remedial measures taken.

• (3) Where the matching adjustment referred to in Regulation 86 is applied, the matters specified in paragraph (2)(d) include a description of the matching adjustment and of the portfolio of obligations and assigned assets to which the matching adjustment is applied as well as a quantification of the impact of a change to zero of the matching adjustment on the undertaking’s financial position.

• (4) The matters specified in paragraph (2)(d) include a statement on whether the volatility adjustment referred to in Regulation 88 is used by the undertaking and a quantification of the impact of a change to zero of the volatility adjustment on the undertaking’s financial position.

• (5) The matters specified in paragraph (2)(e)(i) include an analysis of any significant changes as compared to the previous report and an explanation of any major differences in relation to the value of such elements in financial statements, and a brief description of the capital transferability.

• (6) The disclosure of the Solvency Capital Requirement referred to in paragraph (2)(e)(ii) shall show separately the amount calculated in accordance with Regulations 116 to 138 and any capital add-on imposed in accordance with Regulation 39 or the impact of the specific parameters which the undertaking is required to use in accordance with Regulation 124, together with concise information on its justification by the Bank.

• (7) Without prejudice to any disclosure that is required by law, for a transitional period until 31 December 2020, the undertaking, in disclosing the total Solvency Capital Requirement referred to in paragraph (2)(e)(ii), is not required to disclose the capital add-on or the impact of the specific parameters it is required to use in accordance with Regulation 124.

• (8) The disclosure of the Solvency Capital Requirement by the undertaking shall be accompanied, where applicable, by an indication that its final amount is still subject to supervisory assessment.

Report on solvency and financial condition: transitional deadlines

(a)20 weeks after the end of the undertaking’s financial year ending on or after 30 June 2016 but before 1 January 2017,

(b)18 weeks after the end of the undertaking’s financial year ending on or after 1 January 2017 but before 1 January 2018,

(c)16 weeks after the end of the undertaking’s financial year ending on or after 1 January 2018 but before 1 January 2019, and

(d)14 weeks after the end of the undertaking’s financial year ending on or after 1 January 2019 but before 1 January 2020.

Information for EIOPA

• (a) the average capital add on per undertaking, and the distribution of capital add ons imposed by it during the previous year, measured as a percentage of the Solvency Capital Requirement, shown separately for—

• (i) all insurance undertakings and reinsurance undertakings together,

• (ii) life insurance undertakings,

• (iii) non-life insurance undertakings,

• (iv) insurance undertakings pursuing both life and non-life activities, and

• (v) reinsurance undertakings;

• (b) for each of the categories in subparagraph (a)(i) to (v), the proportion of capital add-ons imposed under Regulation 39(2)(a), (b) and (c) respectively;

• (c) the number of insurance undertakings and reinsurance undertakings benefiting from the limitation on regular supervisory reporting and the number of insurance undertakings and reinsurance undertakings benefiting from the exemption from reporting on an item-by-item basis referred to in Regulation 34(6) to (13), together with their volume of capital requirements, premiums, technical provisions and assets, respectively measured as percentages of the total volume of capital requirements, premiums, technical provisions and assets of the insurance undertakings and reinsurance undertakings;

• (d) the number of groups benefiting from the limitation on regular supervisory reporting and the number of groups benefiting from the exemption from reporting on an item-by-item basis referred to in Regulation 255 together with their volume of capital requirements, premiums, technical provisions and assets, respectively measured as percentages of the total volume of capital requirements, premiums, technical provisions and assets of all the groups.

Report on solvency and financial condition: applicable principles

• (a) an insurance undertaking or reinsurance undertaking applies to the Bank in writing with relevant documentation, and

• (b) the Bank is satisfied that—

• (i) the disclosure of the information by the undertaking would allow competitors of the undertaking to gain significant undue advantage, or

• (ii) there are obligations to policy holders or other counterparty relationships which bind the undertaking to secrecy or confidentiality.

• (2) Where an undertaking does not disclose information in pursuance of a waiver under paragraph (1), the undertaking shall make a statement to this effect in its report on solvency and financial condition and shall state the reasons.

• (3) The Bank may permit the undertaking to make use of, or refer to, public disclosures made under other legal or regulatory requirements, to the extent that those disclosures are equivalent to the information required under Regulation 52 in both their nature and scope.

• (4) Paragraphs (1) and (2) do not apply to the information referred to in Regulation 52(2)(e).

Report on solvency and financial condition: updates and additional voluntary information

• (2) For the purposes of paragraph (1), at least the following shall be regarded as major developments:

• (a) where non-compliance with the Minimum Capital Requirement is observed and the Bank either considers that the undertaking will not be able to submit a realistic short-term finance scheme or does not obtain such a scheme within one month of the date when non-compliance was observed;

• (b) where a significant non-compliance with the Solvency Capital Requirement is observed and the Bank does not obtain a realistic recovery plan within 2 months of the date when non-compliance was observed.

• (3) In a case within paragraph (2)(a), the undertaking shall disclose immediately the amount of the non-compliance, together with an explanation of its origin and consequences, including any remedial measure taken; and where, in spite of a short-term finance scheme initially considered to be realistic, non-compliance with the Minimum Capital Requirement has not been resolved 3 months after its observation, it shall be disclosed at the end of that period, together with an explanation of its origin and consequences, including any remedial measures taken as well as any further remedial measures planned.

• (4) In a case within paragraph (2)(b), the undertaking shall disclose immediately the amount of the non-compliance, together with an explanation of its origin and consequences, including any remedial measure taken; and, where, in spite of the recovery plan initially considered to be realistic, a significant non-compliance with the Solvency Capital Requirement has not been resolved 6 months after its observation, it shall be disclosed at the end of that period, together with an explanation of its origin and consequences, including any remedial measures taken as well as any further remedial measures planned.

• (5) The undertaking may disclose, on a voluntary basis, any information or explanation related to its solvency and financial condition which is not already required to be disclosed in accordance with Regulations 52 and 55 and paragraph (1) of this Regulation.

Report on solvency and financial condition: policy and approval

• (2) The solvency and financial condition report shall be subject to approval by the board of directors of the undertaking and be published only after that approval.

Annual reports

• (2) The financial statements and reports referred to in paragraph (1) shall be forwarded not later than one month after the annual general meeting or written resolution referred to in section 175(3) of the Act of 2014, as the case may be.

Chapter 4 Qualifying holdings

Interpretation

“assessment” and “assessment period” have the meanings given by Regulation 63(3);

“prescribed percentage” means 20%, 33% or 50%;

“proposed acquirer”, in relation to an insurance undertaking or reinsurance undertaking, means a person, or 2 or more persons acting in concert, who has or have taken a decision to, directly or indirectly, acquire or increase a qualifying holding in the undertaking;

“proposed acquisition” means—

• (a) the proposed acquisition of a qualifying holding in an insurance undertaking or reinsurance undertaking, or

• (b) a proposed increase in a qualifying holding in such an undertaking that results in the size of the holding reaching or exceeding a prescribed percentage.

Acquisitions

• (2) A proposed acquirer who has a qualifying holding in an insurance undertaking or reinsurance undertaking shall not, directly or indirectly, increase the size of the holding without having previously notified the Bank in writing of the intended size of the holding after the increase if, as a result of the increase—

• (a) the percentage of the capital of, or the voting rights in, the undertaking that the proposed acquirer holds would reach or exceed a prescribed percentage, or

• (b) in the case of a proposed acquirer that is a company or other body corporate, the undertaking would become the proposed acquirer’s subsidiary undertaking.

• (3) A notification under paragraph (1) or (2) shall include sufficient information to enable the Bank to consider the proposed acquisition against the criteria in paragraphs (1) and (2) of Regulation 64, and in particular shall include—

• (a) information as to the identity of the proposed acquirer,

• (b) information about the reputation and experience of any person who will direct the business of the undertaking as a result of the proposed acquisition,

• (c) information about how the proposed acquisition is to be financed (including details of any proposed issue of financial instruments),

• (d) information about the structure of the resulting group (indicating any changes from current structure), and

• (e) the information referred to in paragraph (4).

• (4) The information mentioned in paragraph (3)(e) is the information required by the form of notification published by the Bank on 25 May 2009 entitled “Acquiring Transaction Notification Form”, as from time to time amended or replaced by the Bank and made available on the official website of the Bank and includes any documentation required by that form.

Disposals

• (2) A person shall not, directly or indirectly, dispose of part of a qualifying holding in an insurance undertaking or reinsurance undertaking without having previously notified the Bank in writing of the intended size of the holding after the proposed disposal if, as a result of the disposal—

• (a) the percentage of the capital of, or the voting rights in, the undertaking that the person holds would fall to or below a prescribed percentage, or

• (b) in the case of a person that is a company or other body corporate, the undertaking would cease to be the person’s subsidiary undertaking.

Insurance and reinsurance undertakings to provide information on certain acquisitions and disposals

• (2) If an insurance undertaking or reinsurance undertaking becomes aware of a disposal of, or a reduction in the size of, a holding in it that results in the holding ceasing to be a qualifying holding or falling to or below a prescribed percentage, the undertaking shall inform the Bank in writing of the disposal or reduction without delay.

Period for assessment of proposed acquisition

• (2) For the purposes of paragraph (1), a notification is completed if it gives all the information and documentation (whether in the notification itself or as an attachment) required by Regulation 60 to be provided for the assessment of the proposed acquisition.

• (3) Within 60 working days after the date of the written acknowledgement referred to in paragraph (1) (in this Chapter referred to as the “assessment period”) the Bank shall carry out the assessment of the proposed acquisition in accordance with Regulation 64 (in this Chapter referred to as the “assessment”).

• (4) In its acknowledgement of receipt of a notification referred to in paragraph (1), the Bank shall inform the proposed acquirer concerned of the date on which the assessment period will end.

• (5) During the assessment period in relation to a proposed acquisition, but no later than the 50th working day of that period, the Bank may request any further information necessary to complete the assessment of the acquisition.

• (6) Where the Bank makes a request under paragraph (5) it shall acknowledge the receipt of any information received in response to the request within 2 working days after the day on which the information is received.

• (7) A request under paragraph (5) shall be made in writing and shall specify or describe the additional information needed.

• (8) If the Bank makes a request under paragraph (5) the assessment period is to be taken to be interrupted for the shorter of—

• (a) the period between the date of the request and the date of the receipt of a response from the proposed acquirer concerned, and

(b)20 working days.

• (9) The Bank may request still further information for completion or clarification of information already supplied but such a further request does not interrupt the assessment period.

• (10) The Bank may, by written notice to a proposed acquirer, extend the interruption referred to in paragraph (8) in relation to a proposed acquisition to 30 working days if the proposed acquirer—

• (a) is situated or regulated in a third country, or

• (b) is a legal or natural person not subject to supervision under a law of a Member State that gives effect to the Directive, Directive 85/611/EEC, Directive 2004/39/EC or Directive 2006/48/EC.

Assessment of proposed acquisitions

• (2) In assessing a proposed acquisition, the Bank shall, having regard to the likely influence of the proposed acquirer concerned on the undertaking, appraise the suitability of the proposed acquirer and the financial soundness of the proposed acquisition concerned against all of the following criteria:

• (a) the reputation of the proposed acquirer;

• (b) the reputation and experience of any person who will direct the business of the undertaking as a result of the proposed acquisition;

• (c) the financial soundness of the proposed acquirer, in particular in relation to the type of business pursued and envisaged in the undertaking;

• (d) whether the undertaking will be able to comply and continue to comply with the prudential requirements of these Regulations, other laws applicable in the State which are adopted pursuant to the Directive, Directive 2002/87/EC or other relevant provisions of the law of the European Union;

• (e) whether the group of which it will become a part has a structure that makes it possible to exercise effective supervision, effectively exchange information among supervisory authorities and determine the allocation of responsibilities among supervisory authorities;

• (f) whether there are reasonable grounds to suspect that, in connection with the proposed acquisition, money laundering or terrorist financing (within the meaning of Article 1 of Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing³⁰ is being or has been committed or attempted, or that the proposed acquisition could increase the risk of money laundering or terrorist financing.

• (3) The Bank shall not examine a proposed acquisition in terms of the economic needs of the market.

• (4) Where 2 or more proposals to acquire or increase qualifying holdings in the same insurance undertaking or reinsurance undertaking have been notified to the Bank, the Bank shall treat the proposed acquirers concerned in a non-discriminatory manner.

Bank to co-operate with other authorities

• (a) an insurance undertaking, reinsurance undertaking, credit institution, investment firm or management company authorised in another Member State or in a sector other than that in which the acquisition is proposed,

• (b) the parent undertaking of an insurance undertaking, reinsurance undertaking, credit institution, investment firm or management company authorised in another Member State or in a sector other than that in which the acquisition is proposed, or