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

• (a) shall reflect the risk arising from the underwriting of health insurance obligations, whether it is pursued on a similar technical basis to that of life insurance or not, following from both the perils covered and the processes used in the conduct of business, and

• (b) shall cover at least the following risks:

• (i) the risk of loss, or of adverse change in the value of insurance liabilities, resulting from changes in the level, trend, or volatility of the expenses incurred in servicing insurance or reinsurance contracts;

• (ii) the risk of loss, or of adverse change in the value of insurance liabilities, resulting from fluctuations in the timing, frequency and severity of insured events, and in the timing and amount of claim settlements at the time of provisioning;

• (iii) the risk of loss, or of adverse change in the value of insurance liabilities, resulting from the significant uncertainty of pricing and provisioning assumptions related to outbreaks of major epidemics, as well as the unusual accumulation of risks under such extreme circumstances.

• (5) The market risk module—

• (a) shall reflect the risk arising from the level or volatility of market prices of financial instruments which have an impact upon the value of the assets and liabilities of the undertaking,

• (b) shall properly reflect the structural mismatch between assets and liabilities, in particular with respect to their duration, and

• (c) shall be calculated, in accordance with Part 4 of Schedule 3, as a combination of the capital requirements for at least the following sub-modules—

• (i) the sensitivity of the values of assets, liabilities and financial instruments to changes in the term structure of interest rates, or in the volatility of interest rates (interest rate risk);

• (ii) the sensitivity of the values of assets, liabilities and financial instruments to changes in the level or in the volatility of market prices of equities (equity risk);

• (iii) the sensitivity of the values of assets, liabilities and financial instruments to changes in the level or in the volatility of market prices of real estate (property risk);

• (iv) the sensitivity of the values of assets, liabilities and financial instruments to changes in the level or in the volatility of credit spreads over the risk-free interest rate term structure (spread risk);

• (v) the sensitivity of the values of assets, liabilities and financial instruments to changes in the level or in the volatility of currency exchange rates (currency risk);

• (vi) additional risks to an undertaking stemming either from lack of diversification in the asset portfolio or from large exposure to default risk by a single issuer of securities or a group of related issuers (market risk concentrations).

• (6) The counterparty default risk module—

• (a) shall reflect possible losses due to unexpected default, or deterioration in the credit standing, of the counterparties and debtors of an undertaking over the following 12 months,

• (b) shall cover risk-mitigating contracts, such as reinsurance arrangements, securitisations and derivatives, and receivables from intermediaries, as well as any other credit exposures which are not covered in the spread risk sub-module, and

• (c) shall take appropriate account of collateral or other security held by or for the account of the undertaking and the risks associated with it.

• (7) For each counterparty, the counterparty default risk module shall take account of the overall counterparty risk exposure of the undertaking concerned to that counterparty, irrespective of the legal form of its contractual obligations to that undertaking.

Calculation of equity risk sub-module: symmetric adjustment mechanism

• (2) The symmetric adjustment made to the standard equity capital charge, calibrated in accordance with Regulation 117(5), covering the risk arising from changes in the level of equity prices shall be based on a function of the current level of an appropriate equity index and a weighted average level of that index, and the weighted average shall be calculated over an appropriate period of time which shall be the same for all insurance undertakings and reinsurance undertakings.

• (3) The symmetric adjustment made to the standard equity capital charge covering the risk arising from changes in the level of equity prices shall not result in an equity capital charge being applied that is more than 10 percentage points lower or 10 percentage points higher than the standard equity capital charge.

Capital requirement for operational risk

• (2) That requirement shall be calibrated in accordance with Regulation 114(3) to (5).

• (3) With respect to life insurance contracts where the investment risk is borne by the policy holders, the calculation of the capital requirement for operational risk shall take account of the amount of annual expenses incurred in respect of those insurance obligations.

• (4) With respect to insurance and reinsurance operations other than those referred to in paragraph (3), the calculation of the capital requirement for operational risk shall take account of the volume of those operations, in terms of earned premiums and technical provisions which are held in respect of those insurance and reinsurance obligations.

• (5) In that case, the capital requirement for operational risks shall not exceed 30% of the Basic Solvency Capital Requirement relating to those insurance and reinsurance operations.

Adjustment for loss-absorbing capacity of technical provisions and deferred taxes

• (2) That adjustment shall take account of the risk mitigating effect provided by future discretionary benefits of insurance contracts, to the extent that an insurance undertaking or reinsurance undertaking can establish that a reduction in such benefits may be used to cover unexpected losses when they arise. The risk mitigating effect provided by future discretionary benefits shall be no higher than the sum of technical provisions and deferred taxes relating to those future discretionary benefits.

• (3) For the purpose of paragraph (2) the value of future discretionary benefits under adverse circumstances shall be compared to the value of such benefits under the underlying assumptions of the best-estimate calculation.

Simplifications in standard formula

• (2) Simplified calculations shall be calibrated in accordance with Regulation 114(3) to (5).

Significant deviations from assumptions underlying standard formula calculation

• (2) Those specific parameters shall be calculated in such a way as to ensure that the undertaking complies with Regulation 114(3) to (5).

• (3) A direction under paragraph (1) shall state the Bank’s reasons for giving it.

Internal model

General provisions for approval of full and partial internal models

• (2) Such an undertaking may use partial internal models for the calculation of one or more of the following:

• (a) one or more risk modules, or sub-modules, of the Basic Solvency Capital Requirement, as set out in Regulations 117 and 119;

• (b) the capital requirement for operational risk as set out in Regulation 121;

• (c) the adjustment referred to in Regulation 122.

• (3) In addition, partial modelling may be applied to the whole business of such an undertaking, or only to one or more major business units.

• (4) In any application for approval by the Bank under paragraph (1), an undertaking shall submit, as a minimum, documentary evidence that the internal model fulfils the requirements set out in Regulations 132 to 137.

• (5) Where the application for approval relates to a partial internal model, the requirements set out in Regulations 132 to 137 shall be adapted to take account of the limited scope of the application of the model.

• (6) The Bank shall decide on the application within 6 months from the receipt of the complete application.

• (7) The Bank shall approve the application only if it is satisfied that the systems of the undertaking are adequate for identifying, measuring, monitoring, managing and reporting risk and in particular, that the internal model fulfils the requirements referred to in paragraphs (4) and (5).

• (8) If the Bank refuses such an application, it shall promptly give to the applicant a written notice of refusal, which must include a statement setting out the reasons for the refusal.

• (9) The Bank may, in the exercise of its powers under financial services legislation, require an undertaking which has received approval to use an internal model, to provide it with an estimate of the Solvency Capital Requirement determined in accordance with the standard formula, as set out in Regulations 116 to 124.

• (10) Such a requirement shall include a statement of the reasons for the requirement.

Specific provisions for approval of partial internal models

• (a) the reason for the limited scope of application of the model is properly justified by the undertaking;

• (b) the resulting Solvency Capital Requirement reflects more appropriately the risk profile of the undertaking and in particular complies with the principles set out in Regulations 113 to 115;

• (c) its design is consistent with those principles so as to allow the partial internal model to be fully integrated into the Solvency Capital Requirement standard formula.

• (2) The Bank, when assessing an application for the use of a partial internal model which covers only—

• (a) certain sub-modules of a specific risk module,

• (b) some of the business units of an undertaking with respect to a specific risk module, or

• (c) parts of both,

may require the undertaking concerned to submit a realistic transitional plan to extend the scope of the model.

• (3) The transitional plan which the undertaking submits shall set out the manner in which it plans to extend the scope of the model to other sub-modules or business units, in order to ensure that the model covers a predominant part of its insurance operations with respect to that specific risk module.

Policy for changing full and partial internal models

• (2) The undertaking may change its internal model in accordance with that policy.

• (3) The policy shall include a specification of minor and major changes to the internal model.

• (4) Major changes to the internal model, as well as changes to that policy, shall always be subject to prior approval by the Bank, as laid down in Regulation 125.

• (5) Minor changes to the internal model shall not be subject to prior approval by the Bank, insofar as they are developed in accordance with that policy.

Responsibilities of board of directors

• (2) The board of directors of an insurance undertaking or reinsurance undertaking which is using an internal model shall be responsible for putting in place systems which ensure that the internal model operates properly on a continuous basis.

Reversion to standard formula

Non-compliance

• (a) present to the Bank a plan to restore compliance within a reasonable period of time, or

• (b) demonstrate that the effect of non-compliance is immaterial.

• (2) Where the undertaking fails to implement the plan referred to in paragraph (1)(a) the Bank may require it to revert to calculating the Solvency Capital Requirement in accordance with the standard formula as set out in Regulations 116 to 124.

Significant deviations from assumptions underlying standard formula calculation

• (2) A direction under paragraph (1) shall state the Bank’s reasons for giving it.

Use test

• (a) its risk-management system as laid down in Regulation 46 and its decision making processes, and

• (b) its economic and solvency capital assessment and allocation processes, including the assessment referred to in Regulation 47.

• (2) In addition, the undertaking shall demonstrate that the frequency of calculation of the Solvency Capital Requirement using the internal model is consistent with the frequency with which it uses its internal model for the other purposes covered by paragraph (1).

• (3) The board of directors of the undertaking is responsible for ensuring the ongoing appropriateness of the design and operations of the internal model, and that the internal model continues to appropriately reflect the risk profile of the undertaking.

Statistical quality standards

• (2) The methods used to calculate the probability distribution forecast—

• (a) shall be based on adequate, applicable and relevant actuarial and statistical techniques,

• (b) shall be consistent with the methods used to calculate technical provisions, and

• (c) shall be based on current and credible information and realistic assumptions.

• (3) The undertaking shall be able to justify to the Bank the assumptions underlying its internal model.

• (4) Data used for the internal model shall be accurate, complete and appropriate.

• (5) In addition, the data sets used in the calculation of the probability distribution forecast shall be updated at least annually by the undertaking.

• (6) The Bank shall not prescribe any particular method for the calculation of the probability distribution forecast.

• (7) Regardless of the calculation method chosen, the undertaking shall ensure that the ability of the internal model to rank risk shall be sufficient to ensure that it is widely used in and plays an important role in its system of governance, in particular its risk management system and decision making processes, and capital allocation in accordance with Regulation 132.

• (8) The internal model shall cover all of the material risks to which insurance undertakings and reinsurance undertakings are exposed and shall cover at least the risks set out in Regulation 114(6) and (7).

• (9) Where the Bank is satisfied that the system used for measuring diversification effects is adequate, the undertaking may take account of those diversification effects in its internal model of dependencies within and across risk categories.

• (10) The undertaking may take full account of the effect of risk-mitigation techniques in its internal model, as long as credit risk and other risks arising from the use of risk-mitigation techniques are properly reflected in the internal model.

• (11) The undertaking shall accurately assess the particular risks associated with financial guarantees and any contractual options in its internal model, where material.

• (12) The undertaking shall also assess the risks associated with both policy holder options and contractual options and how it will impact on the undertaking.

• (13) For that purpose, the undertaking shall take account of the impact that future changes in financial and non financial conditions may have on the exercise of those options.

• (14) In its internal model, the undertaking may take account of future management actions that it would reasonably expect to carry out in specific circumstances and, if it does so, shall make allowance for the time necessary to implement such actions.

• (15) In its internal model, the undertaking shall take account of all payments to policy holders and beneficiaries which it expects to make, whether or not those payments are contractually guaranteed.

Calibration standards

• (2) Where practicable, the undertaking shall derive its Solvency Capital Requirement directly from the probability distribution forecast generated by its internal model, using the Value-at-Risk measure set out in Regulation 114(5).

• (3) Where the undertaking cannot derive its Solvency Capital Requirement directly from the probability distribution forecast generated by its internal model, the Bank may allow approximations to be used in the process to calculate the Solvency Capital Requirement, as long as the undertaking can demonstrate to the Bank that policy holders are provided with a level of protection equivalent to that provided for in Regulation 114.

• (4) The Bank may require the undertaking to run its internal model on relevant benchmark portfolios and using assumptions based on external rather than internal data in order to verify the calibration of the internal model and to check that its specification is in line with generally accepted market practice.

Profit and loss attribution

• (2) The undertaking shall demonstrate how the categorisation of risk chosen in the internal model explains the causes and sources of profits and losses.

• (3) The categorisation of risk and attribution of profits and losses shall reflect the risk profile of the undertaking.

Validation standards

• (2) The model validation process shall include an effective statistical process for validating the internal model which enables the undertaking to demonstrate to the Bank that the resulting capital requirements are appropriate.

• (3) The statistical methods applied shall test the appropriateness of the probability distribution forecast compared not only to loss experience but also to all material new data and information relating to it.

• (4) The model validation process shall include an analysis of the stability of the internal model and in particular the testing of the sensitivity of the results of the internal model to changes in key underlying assumptions. It shall also include an assessment of the accuracy, completeness and appropriateness of the data used by the internal model.

Documentation standards

• (2) The documentation shall—

• (a) demonstrate compliance with Regulations 132 to 136,

• (b) provide a detailed outline of the theory, assumptions and mathematical and empirical bases underlying the internal model, and

• (c) indicate any circumstances under which the internal model does not work effectively.

• (3) The undertaking shall also document all major changes to its internal model, as set out in Regulation 127.

External models and data

Chapter 5 Minimum Capital Requirement

General provisions

Calculation of Minimum Capital Requirement

• (a) it shall be calculated in a clear and simple manner, and in such a way as to ensure that the calculation can be audited;

• (b) it shall correspond to an amount of eligible basic own funds below which policy holders and beneficiaries would be exposed to an unacceptable level of risk if the undertaking were allowed to continue its operations;

• (c) the linear function referred to in paragraph (3) used to calculate the Minimum Capital Requirement shall be calibrated to the Value-at-Risk of the basic own funds of the undertaking subject to a confidence level of 85% over a one-year period;

• (2) The Minimum Capital Requirement shall have an absolute floor of—

(a)€2,500,000 for a non-life insurance undertaking, including a captive insurance undertaking, except in the case where all or some of the risks included in one of classes 10 to 15 in Part 1 of Schedule 1 are covered, in which case the absolute floor shall be €3,700,000,

(b)€3,700,000 for a life insurance undertaking, including a captive insurance undertaking, and

(c)€3,600,000 for a reinsurance undertaking, except a captive reinsurance undertaking, in which case the absolute floor shall be €1,200,000.

• (3) Subject to paragraph (4), the Minimum Capital Requirement of an undertaking shall be calculated as a linear function of a set or sub-set of the following variables, measured net of reinsurance:

• (a) technical provisions;

• (b) written premiums;

• (c) capital-at-risk;

• (d) deferred tax;

• (e) administrative expenses.

• (4) Without prejudice to paragraph (2), the Minimum Capital Requirement shall neither fall below 25% nor exceed 45% of the undertaking’s Solvency Capital Requirement calculated in accordance with Regulations 116 to 124 or Regulations 125 to 138, and including any capital add-on imposed in accordance with Regulation 39.

• (5) Up until 31 December 2017, the Bank may require an undertaking to apply the percentages referred to in paragraph (4) exclusively to the undertaking’s Solvency Capital Requirement calculated in accordance with the standard formula set out in Regulations 116 to 124.

• (6) The undertaking shall calculate the Minimum Capital Requirement at least quarterly and report the results of the calculations to the Bank.

• (7) The undertaking shall not be required to calculate the Solvency Capital Requirement on a quarterly basis for the purpose of calculating the limits referred to in paragraph (4).

• (8) Where either of the limits referred to in paragraph (4) determines the undertaking’s Minimum Capital Requirement, it shall provide to the Bank the necessary information to allow a proper understanding of the reasons for that.

Part 9 INVESTMENTS

Prudent person principle

• (2) The undertaking shall comply with the following investment criteria:

• (a) with respect to the whole portfolio of assets, it shall only invest in assets and instruments whose risks it can properly identify, measure, monitor, manage, control and report, and appropriately take into account in the assessment of its overall solvency needs in accordance with Regulation 47(2)(a);

• (b) it shall invest all its assets, in particular those covering the Minimum Capital Requirement and the Solvency Capital Requirement in such a manner as to ensure the security, quality, liquidity and profitability of the portfolio as a whole and, in addition the localisation of those assets shall be such as to ensure their availability;

• (c) it shall invest its assets held to cover the technical provisions in a manner appropriate to the nature and duration of its insurance and reinsurance liabilities and in the best interest of all policy holders and beneficiaries taking into account any disclosed policy objective;

• (d) if a conflict of interest arises, the undertaking, or the entity which manages its asset portfolio, shall ensure that the investment is made in the best interest of policy holders and beneficiaries.

• (3) Without prejudice to paragraph (2), with respect to assets held in respect of life insurance contracts where the investment risk is borne by the policy holders, the following criteria shall apply:

• (a) where the benefits provided by a contract are directly linked to the value of units in an UCITS as defined in Directive 85/611/EEC, or to the value of assets contained in an internal fund held by the insurance undertaking, usually divided into units, the technical provisions in respect of those benefits must be represented as closely as possible by those units or, in the case where units are not established, by those assets;

• (b) where the benefits provided by a contract are directly linked to a share index or some other reference value other than those referred to in subparagraph (a), the technical provisions in respect of those benefits must be represented as closely as possible either by—

• (i) the units deemed to represent the reference value, or

• (ii) in the case where units are not established, by assets of appropriate security and marketability which correspond as closely as possible with those on which the particular reference value is based;

• (c) where the benefits referred to in subparagraphs (a) and (b) include a guarantee of investment performance or some other guaranteed benefit, the assets held to cover the corresponding additional technical provisions shall be subject to paragraph (4).

• (4) Without prejudice to paragraph (2), with respect to assets other than those covered by paragraph (3)(a) or (b)—

• (a) the use of derivative instruments shall be possible insofar as they contribute to a reduction of risks or facilitate efficient portfolio management,

• (b) investment and assets which are not admitted to trading on a regulated financial market shall be kept to prudent levels,

• (c) assets shall be properly diversified in such a way as to avoid excessive reliance on any particular asset, issuer or group of undertakings, or geographical area, and excessive accumulation of risk in the portfolio as a whole, and

• (d) investments in assets issued by the same issuer, or by issuers belonging to the same group, shall not expose the insurance undertaking to excessive risk concentration.

Limits on freedom of investment

• (2) Any such restrictions shall be applied only where the investment risk is borne by a policy holder who is a natural person and shall not be more restrictive than those set out in Directive 85/611/EEC.

Investment in tradable securities or other financial instruments based on repackaged loans

Part 10 UNDERTAKINGS IN DIFFICULTY OR IN IRREGULAR SITUATION

Identification and notification of deteriorating financial conditions by undertaking

Non-compliance with technical provisions

• (2) The Bank shall designate the assets to be covered by such measures.

Non-compliance with Solvency Capital Requirement

• (2) Within 2 months from the observation of non-compliance with the Solvency Capital Requirement an undertaking shall submit a realistic recovery plan for approval by the Bank.

• (3) The Bank shall require the undertaking to take the necessary measures to achieve, within 6 months from the observation of the non-compliance with the Solvency Capital Requirement—

• (a) the re-establishment of the level of eligible own funds covering the Solvency Capital Requirement, or

• (b) the reduction of its risk profile to ensure compliance with the Solvency Capital Requirement.

• (4) The Bank may, if it considers it appropriate, extend that period of 6 months by 3 months.

• (5) In the event of exceptional adverse situations affecting insurance undertakings and reinsurance undertakings representing a significant share of the market or of the affected lines of business as declared by EIOPA, and where appropriate after consulting with the ESRB, the Bank may extend, for affected undertakings, the period referred to in paragraph (4) by a maximum period of 7 years taking into account all relevant factors, including the average duration of the technical provisions.

• (6) For the purposes of paragraph (5), the Bank may request that EIOPA declare the existence of an exceptional adverse situation where insurance undertakings or reinsurance undertakings representing a significant share of the market or of the affected lines of business are unlikely to meet one of the requirements set out in paragraph (3).

• (7) For the purposes of this Regulation, exceptional adverse situations exist where the financial situation of insurance undertakings or reinsurance undertakings representing a significant share of the market or of the affected lines of business are seriously or adversely affected by one or more of the following conditions:

• (a) a fall in financial markets which is unforeseen, sharp and steep;

• (b) a persistent low interest rate environment;

• (c) a high impact catastrophic event.

• (8) In the situation outlined in paragraph (5), the undertaking shall, every 3 months, submit a progress report to the Bank setting out the measures taken and the progress made to—

• (a) re-establish the level of eligible own funds covering the Solvency Capital Requirement, or

• (b) reduce the risk profile to ensure compliance with the Solvency Capital Requirement.

• (9) The Bank shall withdraw the extension referred to in paragraph (5) where the progress report does not show that the undertaking has made any significant progress towards achieving—

• (a) the re-establishment of the level of eligible own funds covering the Solvency Capital Requirement, or

• (b) the reduction of the risk profile to ensure compliance with the Solvency Capital Requirement,

between the date of the observation of non-compliance with the Solvency Capital Requirement and the date of the submission of the progress report.

• (10) The Bank may also in exceptional circumstances, where it is of the opinion that the financial situation of the undertaking will deteriorate further, exercise its powers under financial services legislation to restrict or prohibit the free disposal of the assets of the undertaking.

• (11) Where it does so, the Bank shall inform the supervisory authorities of the host Member States of any measures it has taken, and it may also request those authorities to take the same measures.

• (12) In those circumstances, the Bank shall designate the assets to be covered by such measures.

Derogation from non-compliance with Solvency Capital Requirement

• (a) Part A of Annex II to the European Communities (Non-Life Insurance) Framework Regulations 1994,

• (b) Part A of Annex II to the European Communities (Life Assurance) Framework Regulations 1994, or

• (c) Schedule 1 to the European Communities (Reinsurance) Regulations 2006,

immediately before 1 January 2016, but does not comply with the Solvency Capital Requirement in the first year during which Regulations are in force, the Bank shall require the undertaking to take the necessary measures to achieve, by 31 December 2017, the establishment of the level of eligible own funds covering the Solvency Capital Requirement or the reduction of its risk profile to ensure compliance with the Solvency Capital Requirement.

• (2) An undertaking to which paragraph (1) applies shall, every 3 months, submit a progress report to the Bank setting out the measures taken and the progress made to establish the level of eligible own funds covering the Solvency Capital Requirement, or to reduce its risk profile to ensure compliance with the Solvency Capital Requirement.

• (3) The Bank shall withdraw the extension referred to in paragraph (1) where the progress report does not show that the undertaking has made any significant progress towards—

• (a) the re-establishment of the level of eligible own funds covering the Solvency Capital Requirement, or

• (b) the reduction of the risk profile to ensure compliance with the Solvency Capital Requirement,

between the date of the observation of non-compliance with the Solvency Capital Requirement and the date of the submission of the progress report.

Non-compliance with Minimum Capital Requirement

• (2) Within one month from the observation of non-compliance with the Minimum Capital Requirement, the undertaking shall submit, for approval by the Bank, a short-term realistic finance scheme—

• (a) to restore, within 3 months of that observation, the eligible basic own funds at least to the level of the Minimum Capital Requirement, or

• (b) to reduce, within 3 months of that observation, its risk profile to ensure compliance with the Minimum Capital Requirement.

• (3) The Bank may also exercise its powers under financial services legislation to restrict or prohibit the free disposal of the assets of the undertaking.

• (4) Where it does so, the Bank shall inform the supervisory authorities of the host Member States of any measures it has taken, and it may also request those authorities to take the same measures.

• (5) In those circumstances, the Bank shall designate the assets to be covered by such measures.

Transitional arrangements regarding compliance with Minimum Capital Requirement

• (a) Part A of Annex II to the European Communities (Non-Life Insurance) Framework Regulations 1994,

• (b) Part A of Annex II to the European Communities (Life Assurance) Framework Regulations 1994, or

• (c) Schedule 1 to the European Communities (Reinsurance) Regulations 2006,

immediately before 1 January 2016 but does not hold sufficient eligible basic own funds to cover the Minimum Capital Requirement, the undertaking shall comply with Regulation 139 by 31 December 2016.

• (2) If the undertaking fails to comply with Regulation 139 within the period set out in paragraph (1), its authorisation shall be withdrawn.

Prohibition of free disposal of assets located within the State

Supervisory powers in deteriorating financial conditions

• (2) The measures taken pursuant to paragraph (1) shall be proportionate and thus reflect the level and duration of the deterioration of the solvency position of the undertaking.

Recovery plan and finance scheme

• (a) estimates of management expenses, in particular current general expenses and commissions;

• (b) estimates of income and expenditure in respect of direct business, reinsurance acceptances and reinsurance cessions;

• (c) a forecast balance sheet;

• (d) estimates of the financial resources intended to cover the technical provisions and the Solvency Capital Requirement and the Minimum Capital Requirement;

• (e) the overall reinsurance policy.

• (2) Where the Bank has required a recovery plan referred to in Regulation 146(2) or a finance scheme referred to in Regulation 148(2) in accordance with paragraph (1), it shall refrain from issuing a certificate in accordance with Regulation 41 for as long as it considers that the rights of the policy holders, or the contractual obligations of the reinsurance undertaking, are threatened.

Withdrawal of authorisation

• (a) the undertaking does not make use of the authorisation within 12 months, expressly renounces it or ceases to pursue business for more than 6 months;

• (b) the undertaking no longer fulfils the conditions for authorisation;

• (c) the undertaking fails seriously in its obligations under financial services legislation or other laws applicable in the State adopted pursuant to the Directive.

• (2) The Bank shall withdraw an authorisation granted to an insurance undertaking or reinsurance undertaking if—

• (a) it does not comply with the Minimum Capital Requirement and the Bank considers that the finance scheme submitted is manifestly inadequate, or

• (b) it fails to comply with the approved scheme within 3 months from the observation of non-compliance with the Minimum Capital Requirement.

• (3) If the Bank withdraws an authorisation of an insurance undertaking or reinsurance undertaking the Bank shall notify the supervisory authorities of the other Member States.

• (4) If the Bank is notified of a withdrawal or lapse of an authorisation of an insurance undertaking or reinsurance undertaking by the supervisory authority of the undertaking’s home Member State, it shall take appropriate measures to prevent the undertaking from commencing new operations within the State.

• (5) The Bank shall work together with the supervisory authorities of other Member States to take all measures necessary to safeguard the interests of insured persons and, in particular, shall restrict the free disposal of the assets of the insurance undertaking in accordance with Regulation 150.

• (6) Any decision to withdraw an authorisation of an insurance undertaking or reinsurance undertaking shall state the full reasons and shall be communicated to the undertaking.

• (7) A decision of the Bank to withdraw an authorisation of an insurance undertaking or reinsurance undertaking under this Regulation is anappealable decision for the purposes of Part VIIA of the Act of 1942.

• (8) The Bank shall notify EIOPA of every withdrawal of an authorisation.

Part 11 RIGHT OF ESTABLISHMENT AND FREEDOM TO PROVIDE SERVICES

Chapter 1 Establishment by insurance undertakings

Branch establishment in another Member State

• (2) The undertaking shall provide the following information when effecting the notification provided for in paragraph (1):

• (a) the Member State which is to be the host Member State;

• (b) a scheme of operations setting out, at least, the types of business envisaged and the structural organisation of the branch;

• (c) the name of a person who possesses sufficient powers to bind, in relation to third parties, the insurance undertaking and to represent it in relations with the authorities and courts of the host Member State (in this Regulation and Regulation 155 referred to as “the authorised agent”);

• (d) the address in the host Member State from which documents may be obtained and to which they may be delivered, including all communications to the authorised agent.

• (3) Where a non-life insurance undertaking intends its branch to cover risks classified under class 10 in Part 1 of Schedule 1, not including carrier’s liability, it shall produce a declaration to the Bank that it has become a member of the national bureau and the national guarantee fund of the host Member State.

Communication of information to other Member State

• (a) the adequacy of the system of governance or the financial situation of the insurance undertaking, or

• (b) that the authorised agent meets any standard of fitness and probity specified in a code issued by the Bank under section 50 of the Act of 2010,

it shall, within 3 months of receiving all the information referred to in Regulation 154(2), communicate that information to the supervisory authority of the host Member State and shall inform the insurance undertaking that it has done so.

• (2) The Bank shall also furnish a certificate to the supervisory authority of the host Member State confirming, if such be the case, that the Solvency Capital Requirement and the Minimum Capital Requirement are covered by the undertaking.

• (3) Where the Bank makes a decision not to communicate the information referred to in Regulation 154(2) to the supervisory authority of the host Member State it shall state the reasons for its decision to the undertaking within 3 months of receiving all the information in question.

• (4) Such a decision is an appealable decision for the purposes of Part VIIA of the Act of 1942.

• (5) Where the Bank receives, in relation to an insurance undertaking proposing to establish a branch within the territory of another Member State, information from the other Member State in relation to the conditions under which, in the interest of the general good, business must be pursued in that Member State, it shall communicate this information to the insurance undertaking.

Change of particulars where the State is home Member State

Branch establishment in the State

• (2) The insurance undertaking may establish the branch and start business in the State as from the date on which the supervisory authority of the home Member State has received the notification referred to in paragraph (1) or, if no notification is received, after the end of the period mentioned in that paragraph.

• (3) With regard to Lloyd’s, in the event of any litigation in the State arising out of underwritten commitments, the insured persons shall not be treated less favourably than if the litigation had been brought against businesses of a conventional type.

Change of particulars where the State is host Member State

Rights acquired by existing branches

Chapter 2 Freedom of insurance undertakings to provide services

General

Prior notification of intention to do business in another Member State

• (2) The Bank shall, within one month of the notification provided for in paragraph (1), communicate the following to the supervisory authority of the Member State within which the undertaking intends to pursue business under the freedom to provide services:

• (a) if the Solvency Capital Requirement and Minimum Capital Requirement are covered by the undertaking, a certificate confirming that;

• (b) the classes of insurance which the undertaking has been authorised to offer;

• (c) the nature of the risks or commitments which the undertaking proposes to cover in the Member State.

• (3) The Bank shall, at the same time, inform the undertaking of that communication.

• (4) The undertaking may start business as from the date on which it is informed of the communication provided for in paragraph (2).

• (5) Where the Bank makes a decision not to communicate the information referred to in paragraph (2) within the period mentioned in that paragraph, it shall state the reasons to the undertaking within that period.

• (6) Such a decision is an appealable decision for the purposes of Part VIIA of the Act of 1942.

Changes in nature of risks or commitments

Carrying on business in the State

• (2) Where the insurance undertaking intends to carry on insurance business by way of services into the State, the Bank shall notify the supervisory authority of the home Member State of the conditions under which, in the interest of the general good, the insurance business may be carried on in the State.

Rights acquired by existing insurance undertakings

Third party motor vehicle liability

Compulsory insurance on third party motor vehicle liability

• (2) The undertaking shall become a member of, and participate in the financing of, the Motor Insurers’ Bureau of Ireland and the national guarantee fund of the State.

• (3) The undertaking shall submit a declaration to the Bank attesting that the undertaking has become a member of the Motor Insurers’ Bureau of Ireland and the national guarantee fund of the State.

• (4) The insurance undertaking shall not be required to make any payment or contribution to the Motor Insurers’ Bureau of Ireland or the national guarantee fund of the State otherwise than by reference to its gross premium income in respect of the coverage of risks classified under class 10 of Part 1 of Schedule 1, other than carrier’s liability, underwritten in the State by way of services, or in respect of the number of risks underwritten in the State by way of services in that class.

• (5) The undertaking shall become a party to the Declined Cases Agreement and comply with the rules concerning the cover of aggravated risks insofar as they apply to non-life insurance undertakings authorised by the Bank; and in this paragraph the “Declined Cases Agreement” means the Agreement made on the 18th day of June 1981 between the Minister of Industry and Commerce of the one part and each of those insurance companies and members of the Underwriting Syndicates at Lloyds who carry on motor vehicle insurance business in the State.

• (6) The undertaking shall ensure that persons pursuing claims arising out of events occurring in the State are not placed in a less favourable situation as a result of the fact that the undertaking is covering a risk, other than carrier’s liability in class 10 in Part 1 of Schedule 1, by way of provision of services rather than through an establishment in the State.

• (7) For this purpose the undertaking shall appoint a representative resident or established in the State who shall collect all necessary information in relation to claims, and shall possess sufficient powers to represent the undertaking in relation to persons suffering damage who could pursue claims, including the payment of such claims, and to represent it or, where necessary, to have it represented before the courts and authorities of the State in relation to those claims.

• (8) The undertaking shall notify the Bank of the name and address of the representative appointed under paragraph (7) and of the claims representative in the State appointed in accordance with Article 4 of Directive 2000/26/EC.

• (9) The representative appointed under paragraph (7) may also be required to represent the undertaking before the Bank with regard to checking the existence and validity of motor vehicle liability insurance policies.

• (10) The appointment of the representative under paragraph (7) shall not in itself constitute the opening of a branch for the purpose of Regulation 154.

• (11) Where the undertaking fails to appoint a representative in accordance with paragraph (7), the claims representative referred to in paragraph (8) may assume the functions of that representative.

Chapter 3 Competencies of supervisory authorities of host Member State

Insurance

Language

Prior notification and prior approval

• (2) The Bank shall only require an insurance undertaking authorised in a Member State other than the State that proposes to pursue insurance business in the State to effect non-systematic notification of policy conditions and other documents for the purpose of verifying compliance with the law concerning insurance contracts, and that requirement shall not constitute a prior condition for an undertaking to pursue its business in the State.

• (3) The Bank shall not retain or introduce a requirement for prior notification or approval of proposed increases in premium rates by an insurance undertaking authorised in a Member State other than the State which conducts business in the State except as part of general price control systems.

Non-compliant insurance undertakings authorised in another Member State

• (2) Where the undertaking fails to take the necessary action, the Bank shall inform the supervisory authority of the home Member State accordingly.

• (3) If the undertaking persists in its failure to comply with the legal provisions applicable to it in the State, despite any measures taken by the home Member State or because those measures prove to be inadequate or are lacking in that State, the Bank may, after informing the supervisory authority of the home Member State, in the exercise of its powers under financial services legislation, take appropriate measures to prevent or penalise further failure, including, in so far as is strictly necessary, preventing the undertaking from concluding new insurance contracts in the State.

• (4) Paragraphs (1) to (3) shall not affect the power of the Bank to take appropriate emergency measures to prevent or penalise failures in the State, including preventing the undertaking from concluding new insurance contracts in the State.

• (5) Paragraphs (1) to (3) shall not affect the power of the Bank to penalise failures in the State by undertakings authorised in a Member State other than the State.

• (6) Any measure adopted under paragraphs (3) to (5) involving restrictions on the conduct of insurance business by an insurance undertaking authorised in a Member State other than the State shall be properly reasoned and communicated to the undertaking.

• (7) An insurance undertaking authorised in a Member State other than the State which is conducting business in the State shall, if the Bank requires it to do so in the exercise of its powers under financial services legislation, submit all documents requested for the purposes of paragraphs (1) to (6) insofar as insurance undertakings authorised by the Bank are required to do so.

• (8) The Bank shall inform the Commission and EIOPA of the number and types of cases which led to decisions not to communicate the information as referred to in Regulation 155(3) or 160(5) or in which measures have been taken under paragraph (3) or (4) of this Regulation.

Non-compliant insurance undertakings authorised by Bank

• (2) The Bank shall inform that supervisory authority of the measures taken.

Advertising

Taxes on premiums

• (2) For the purposes of paragraph (1), movable property contained in a building situated within the territory of the State, except for goods in commercial transit, shall be considered as a risk situated in the State, even where the building and its contents are not covered by the same insurance policy.

• (3) The law applicable to the contract under Article 178 of the Directive and under Regulation (EC) No 593/2008 shall not affect the fiscal arrangements applicable.

Reinsurance

Non-compliant reinsurance undertakings authorised in another Member State

• (2) At the same time, the Bank shall refer those findings to the supervisory authority of the home Member State.

• (3) If the undertaking persists in its failure to comply with the laws applicable to it in the State, despite any measures taken by the home Member State or because those measures prove to be inadequate or are lacking in that State, the Bank may, after informing the supervisory authority of the home Member State, exercise its powers under financial services legislation to take appropriate measures to prevent or penalise further failure, including, in so far as is strictly necessary, preventing the undertaking from concluding new reinsurance contracts within the State.

• (4) Any measure under paragraph (1) or (3) involving sanctions or restrictions on the conduct of reinsurance business shall state the reasons and shall be communicated to the undertaking.

Non-compliance by reinsurance undertaking authorised by Bank

• (2) The Bank shall inform that supervisory authority of the measures taken.

Chapter 4 Statistical information

Statistical information on cross-border activities

• (2) The undertaking shall provide the amount of the premiums, claims and commissions, without deduction of reinsurance, by Member State and, for both non-life insurance business and life insurance business, by lines of business in accordance with Commission Delegated Regulation (EU) 2015/35.

• (3) As regards business in class 10 in Part 1 of Schedule 1, not including carrier’s liability, the undertaking shall also inform the Bank of the frequency and average cost of claims.

• (4) The Bank shall submit the information referred to in this Regulation within a reasonable time and in aggregate form to the supervisory authorities of each of the Member States concerned on their request.

• (5) The Bank may request the supervisory authority of the home Member State of an insurance undertaking conducting business in the State through a branch or on the basis of the freedom to provide services to provide it with the information referred to in Article 159 of the Directive which has been provided to the supervisory authority by the undertaking.

Chapter 5 Winding-up proceedings

Winding-up of insurance undertakings

Winding-up of reinsurance undertakings

Part 12 BRANCHES OF UNDERTAKINGS ESTABLISHED OUTSIDE EUROPEAN UNION

Chapter 1 Taking up of business

Principle of authorisation and conditions

• (2) The Bank may grant an authorisation where a third-country insurance undertaking fulfils at least the following conditions:

• (a) it is entitled to pursue insurance business under the law of the state in which its head office is situated;

• (b) it establishes a branch in the State;

• (c) it undertakes to set up at the place of management of the branch accounts specific to the business which it pursues in the State, and to keep at the place of management all the records relating to the business transacted;

• (d) it designates a general representative, to be approved by the Bank;

• (e) it holds in the State assets of an amount equal to at least 50% of the absolute floor prescribed in Regulation 140(2) in respect of the Minimum Capital Requirement and deposits with the Court 25% of that absolute floor as security;

• (f) it undertakes to cover the Solvency Capital Requirement and the Minimum Capital Requirement in accordance with the requirements of these Regulations;

• (g) it communicates the name and address of the claims representative appointed in each Member State other than the State where the risks to be covered are in class 10 of Part 1 of Schedule 1 other than carrier’s liability;

• (h) it submits a scheme of operations in accordance with the provisions in Regulation 177;

• (i) it fulfils the governance requirements laid down in Regulations 44 to 51.

• (3) A branch of a third-country insurance undertaking authorised to undertake insurance in the State may apply to extend its business to classes of insurance for which it is not authorised or to parts of such classes.

• (4) For the purposes of this Part “branch” means a permanent presence in the State of a third-country insurance undertaking which receives authorisation and which pursues insurance business.

Scheme of operations of branch

• (a) the nature of the risks or commitments which the undertaking proposes to cover;

• (b) the guiding principles as to reinsurance;

• (c) estimates of the future Solvency Capital Requirement, on the basis of a forecast balance sheet, as well as the calculation method used to derive those estimates;

• (d) estimates of the future Minimum Capital Requirement, on the basis of a forecast balance sheet, as well as the calculation method used to derive those estimates;

• (e) the state of the eligible own funds and eligible basic own funds of the undertaking with respect to the Solvency Capital Requirement and Minimum Capital Requirement;

• (f) estimates of the costs of setting up the administrative services and the organisation for securing business, the financial resources intended to meet those costs and, where the risks to be covered are in class 18 in Part 1 of Schedule 1, the resources available for the provision of the assistance;

• (g) information on the structure of the system of governance.

• (2) In addition to the requirements set out in paragraph (1), the scheme of operations shall include the following, for the first 3 financial years:

• (a) a forecast balance sheet;

• (b) estimates of the financial resources intended to cover technical provisions, the Minimum Capital Requirement and the Solvency Capital Requirement;

• (c) for non-life insurance—

• (i) estimates of management expenses other than installation costs, in particular current general expenses and commissions;

• (ii) estimates of premiums or contributions and claims;

• (d) for life insurance, a plan setting out detailed estimates of income and expenditure in respect of direct business, reinsurance acceptances and reinsurance cessions.

• (3) With regard to life insurance, the Bank may require third-country insurance undertakings to submit systematic notification of the technical bases used for calculating scales of premiums and technical provisions, without that requirement constituting a prior condition for a life insurance undertaking to pursue its business.

Transfer of portfolio

• (a) an insurance undertaking with its head office in the State,

• (b) a branch of another third-country insurance undertaking established in the State,

• (c) an insurance undertaking whose head office is in another Member State, or