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European Insurance and Occupational Pensions Authority

2958

Q&A

Question ID: 2958

Regulation Reference: (EU) No 2009/138 - Solvency II Directive (Insurance and Reinsurance)

Topic: Intra-group transaction

Status: Final

Date of submission: 18 Jan 2024

Question

An insurance holding company provides a loan to a majority-owned insurance undertaking in the group. The group uses, in accordance with Article 328 of Commission Delegated Regulation (EU) 2015/35, method 2 to consolidate this insurance undertaking.

There are other insurance and financial undertakings in the group consolidated using method 1. The group therefore uses a combination of methods 1 and 2 for the calculation of the group solvency.

How should the loan be considered when calculating the consolidated group SCR, in particular:

  • the liabilities of the undertaking subject to method 2;
  • the assets of the insurance holding company;
  • the interest rate risk, spread risk and market concentration risk associated with the asset in the insurance holding company?

Same question considering a loan from insurance undertaking A in a group to insurance undertaking B in the same group, where undertaking A uses method 1 consolidation and the reciprocal situation.

EIOPA answer

This answer is based on the assumption that the loan is not subordinated, is not part of reciprocal financing and is free from encumbrances.

In this situation the group SCR should be the sum of the consolidated group SCR of the part of the group under method 1 and the proportional share of the solo SCR of the method 2 undertaking, gross of any intra-group transactions. The consolidated group SCR should be based on the applicable shocks to the assets of the fully consolidated part of the group including the loan. Similarly, the solo SCR of the insurance undertaking under method 2 should be based on the applicable shocks to the loan on the liability side.
 

For the determination of the group own funds and independently from the used of method 1 or 2, the intra-group transaction should be analysed to determine whether it leads to double use of eligible own funds or  the creation of intra-group capital. Provided that the loan does not result in double use of eligible own funds nor creation of intragroup capital as referred to in Articles 222 and 223 of Directive 2009/138/EC, there should be no specific adjustments to the group own funds due to this intra-group transaction.