Approval of undertaking specific parameters (USP)
When calculating their regulatory capital requirement, insurance institutions and groups may, in certain cases, use parameters specific to them in place of the parameters in the standard formula. These are commonly known as undertaking-specific parameters (USPs), or group-specific parameters (GSPs) when applied at group level to calculate the capital requirement on a combined or consolidated basis.
The parameters that can be personalised in this way are laid down in regulations; they relate solely to the calculation of certain underwriting risks, at the segmentation level that includes, for each relevant business line, direct business, and accepted proportionately.
The use by an insurance institution or group of specific parameters for calculating the capital requirement is subject to prior authorisation by the ACPR.
The use of specific parameters is defined, for institutions and groups respectively, in point V of Article R.352-5 and in the ninth paragraph of point II of Article R.356-19 of the Insurance Code, applicable to institutions and groups covered by each of the three codes, which transpose Article 104 (7) of Directive 2009/138/EC, known as “Solvency II”. These provisions are supplemented by Articles 218 to 220 and Annex XVII, as well as Article 338 for groups, of Delegated Regulation (EU) 2015/35, known as “Level 2”.
Finally, the content of the application and the various stages in the approval procedure are laid down in Implementing Regulation (EU) 2015/498 establishing Implementing Technical Standards (ITS) regarding the procedures to be used by supervisory authorities to approve the use of undertaking-specific and group-specific parameters.
The minimum content of the application is defined in Article 1 of the aforementioned implementing regulation.
In summary, the application must contain the following:
Applications should be sent by post to the following address, as well as by e-mail to the inspection team responsible for the institution or 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
The ACPR will reach its authorisation decision on the full or partial use of specific parameters within a maximum of six months from receipt of the completed application.
The use of specific parameters for calculating solvency at individual level by an institution and on a consolidated or combined basis by a group are two distinct and independent measures from an administrative perspective.
A group that calculates its regulatory capital requirement on the basis of consolidated or combined financial statements cannot take into account any specific parameters approved for individual institutions. If the group wishes also to use specific parameters, it must seek prior authorisation from the ACPR, taking into account the risk profile of the entire group, under the same procedure as that used for individual institutions.
Similarly, the authorisation of a group to use group-specific parameters to calculate its adjusted solvency does not constitute authorisation for the group’s individual member institutions.
Updated on: 07/17/2017 14:49