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Own funds items which are not included in the list of own funds items

Approval of the assessment and classification of own funds items which are not included in the list of own funds items

Overview of the measure

Own-fund items (both basic and ancillary) are classified into three tiers based on their quality – Tier 1 (highest quality), Tier 2 and Tier 3. Only those items that meet the eligibility requirement for a tier are eligible to count towards the solvency capital requirement (SCR) and the minimum capital requirement). Items not meeting the criteria for any tier are declassified – i.e. they do not form part of prudential own funds.

The classification of own-fund items into tiers depends, in particular, on the extent to which they meet permanent availability and subordination criteria.

In classifying their own-fund items as Tier 1, 2 or 3, insurance institutions should refer, where applicable, to the list of own-fund items referred to in point (a) of the first paragraph of Article 97 of Directive 2009/138/EC, known as “Solvency II”.

Where an item is not covered by that list, its eligibility as an own-fund item and its classification into one of the three tiers require prior approval from the ACPR.

Regulatory references

Provisions on the admission and classification of unlisted own-fund items are laid down in Article R.351-24 of the Insurance Code, applicable to institutions covered by each of the three codes, which transposes Article 95 of the Solvency II directive. They are clarified in Article 79 of Delegated Regulation (EU) 2015/35, known as “Level 2”.

Principles concerning the definition of own funds and the classification into different tiers are detailed in Articles 69 to 78 of the Delegated Regulation.

The terms of such authorisation are detailed in ACPR Instruction 2015-I-05 on requests for approval of the measurement and classification of unlisted own-fund items and its annex. These are available via the following links:

Content of the application

A full list of documents to be submitted is laid down in the annex to the aforementioned instruction. In summary, the application must include the following for each own-fund item submitted for approval:

  • a description of the item, consisting of the following:
    • a summary of the key characteristics of the own-fund item
    • where applicable, the contract, agreement or any other stipulation determining the characteristics of the item (in final form or, failing that, in draft form)
  • information that can be used to assess the item’s eligibility as own funds
  • information supporting the classification proposed by the institution
  • information that can be used to assess potential changes in the characteristics of the own-fund item over time

N.B. Where an institution requests approval to recognise an item of ancillary own funds which, when called, takes the form of an unlisted item, it must also request recognition of ancillary own funds in accordance with the provisions of Article L.351-6 of the Insurance Code.

Procedure

Applications should be sent by post to the following address, as well as by e-mail to the inspection team responsible for the group:

Secrétariat général de l’Autorité de contrôle prudentiel et de résolution
Brigade de contrôle des organismes d’assurance
61, rue Taitbout
75436 Paris Cedex 09

For applications filed on or after 1 January 2016, the ACPR will reach its decision within a maximum of three months from receipt of the completed application.

For applications filed before 30 September 2015, the maximum response period is six months.

For applications filed between 1 October and 31 December 2015, the ACPR will reach its decision by 31 March 2016.

Consequences for the group

If an institution using this procedure belongs to a group, the group’s combined or consolidated financial statements are prepared on the basis of the individual financial statements after applying the measure; the group need not request the same authorisation. However, the group is subject to the reporting requirements in connection with the use of that measure.

Last update 17/06/2015

Updated on: 07/13/2017 16:42