In cases where it is subject to prior authorisation by the ACPR, the issuance of equity securities, certificats mutualistes, certificats paritaires and subordinated instruments is governed by the following provisions:

• Mutual insurance companies and SGAMs (covered by the Insurance Code)

The decision to issue (or to delegate authority to the board of directors to issue) falls to the general assembly. The draft resolution must be submitted to the ACPR for prior authorisation at least two months before the general assembly's meeting in question.

• Provident institutions, unions of provident institutions and SGAPS (institutions covered by the Social Security Code)

The decision to issue (or to delegate authority to the board of directors to issue) falls to the general assembly (or, where applicable, to the joint committee). The draft deliberation must be submitted to the ACPR for authorisation at least three months before the general assembly's meeting or joint committee meeting in question.

• Mutual insurers and unions of mutual insurers (including UMGs) (institutions covered by the Mutual Insurance Code)

The decision to issue (or to delegate authority to the board of directors to issue) falls to the general assembly. The draft deliberation must be submitted to the ACPR for authorisation at least three months before the general assembly meeting in question.

"Certificats mutualistes" and "certificats paritaires"

The redemption of certificats mutualistes and certificats paritaires must be covered by a redemption programme approved by the shareholders at a general meeting or, where applicable, by the commission paritaire (joint committee). The associated draft resolution must be submitted to the ACPR for approval at least two months in advance.

The programme should define the undertaking’s redemption policy, the terms of redemptions and the maximum number of certificates that may be redeemed. It should also state the effects of redemptions on the solvency of the undertaking and, where applicable, the group.

Subordinated debt securities

The redemption and early repayment of funds raised by issuing securities are subject to prior approval by the ACPR.

In its application for authorisation, the undertaking must provide a solvency plan indicating, for itself and, where applicable, for the group to which it belongs, how it will continue to comply with solvency requirements (minimum margin, SCR and MCR) at the requisite regulatory levels after redemption.

Where the undertaking plans to repay the funds raised via the issue at maturity and those funds form part of its prudential own funds (solvency margin or eligible own funds), it must provide the ACPR with a solvency plan a year before the redemption date. However, such a plan is not required if the undertaking has gradually and steadily reduced the proportion of liabilities included in the solvency margin to zero over at least the five years preceding the redemption date.

Automatic repayment clauses

The basic own-fund item is repayable or redeemable only at the option of the insurance or reinsurance undertaking issuer. Therefore, own-fund items which include contractual provisions of automatic repayment or redemption triggered by an external event (for instance, changes in the accounting, regulatory or tax framework) are not eligible to cover capital requirements.

Optional repayment clauses

Regardless of the date, the repayment or redemption of an own-fund item (before or after the first five years from the date of issuance) out of the proceeds of a new basic own-fund item of at least the same quality shall not be deemed to be a repayment or redemption, provided that it is subject to the approval of the supervisory authority

• During the first five years from the date of issuance

The adverse development of the accounting, regulatory or tax framework, which may trigger a repayment or redemption option ("early call", "tax call" or "regulatory call") does not waive the minimum five years period before which repayment or redemption is allowed by the insurance regulation. Thus, for example, any contractual option to repay or redeem before five years from the date of issuance, including early call, tax call or regulatory call, prevents the own-fund item from being eligible to cover the capital requirement.

• After five years from the date of issuance

Under certain conditions, any basic own-fund may include contractual terms providing options for repayment or redemption after 5 years from the date of issuance.

Among these contractual terms, some provide that if the repayment or redemption is not made, the issuer must bear the potential overcost faced by the investor due to tax changes (“fiscal gross-up” clauses). In most cases, the ACPR considers that these clauses would not cause the insolvency or accelerate the process of the undertaking becoming insolvent; hence they would not in principle prevent this own-fund item from being eligible to cover the capital requirement (MCR and SCR) of the insurance or reinsurance undertaking. Nevertheless, these repayment or redemption options linked to gross-up clauses are considered by the ACPR as incentives to repay or redeem.

In general, any contractual terms that create incentives to repay or redeem which are not considered limited prevent the own-fund item from being eligible to cover the capital requirement of the insurance or reinsurance undertaking.

Conversely, if the incentive to repay or redeem is considered limited, the item can be admissible if the contractual terms follow these principles:

• For Tier 1 own-fund items: only if, regardless of the date when the repayment or redemption is made, the item is repaid or redeemed out of the proceeds of a new basic own-fund item of at least the same quality.

• For Tier 2 own-fund items: only if the item is repaid or redeem out of the proceeds of a new basic own-fund item of at least the same quality, during the first ten years from the date of issuance.  

Before approving any repayment or redemption of own-fund items, the ACPR will ensure that the operation complies with these conditions.

The own-fund items referred to in article R.351-27 of the French “Code des Assurances” (own-fund items subject to grandfathering) are eligible to cover the capital requirement (SCR and MCR) of the insurance undertaking regardless of the contractual clauses previously mentioned