INSURANCE BUSINESS (SOLVENCY II TRANSITIONAL PROVISIONS) REGULATIONS

SUBSIDIARY LEGISLATION 403.23

INSURANCE BUSINESS (SOLVENCY II

TRANSITIONAL PROVISIONS) REGULATIONS

1st January, 2016 *

LEGAL NOTICE 404 of 2015.

(1) The title of these regulations is the Insurance Business

(Solvency II Transitional Provisions) Regulations.

(2) The purpose of these regulations is to implement Articles

51(2) third sub-paragraph, 129(3) second sub-paragraph, 131,

256(1), 308b, 308c, 308d and 308e of the Solvency II Directive and

they shall be interpreted and applied accordingly.

(1) In these regulations, unless the context otherwise

requires

"the Act" is the Insurance Business Act;

"authorised insurance undertaking" means an undertaking, which

has received authorisation pursuant to article 7 of the Act to carry

on direct general business and, or long term business, and includes

an undertaking authorised to carry on direct and reinsurance

business;

"authorised reinsurance undertaking" means an undertaking,

which has received authorisation pursuant to article 7 of the Act to

carry on business restricted to reinsurance;

"competent authority" means the Malta Financial Services

Authority established by the Malta Financial Services Authority

Act;

"insurance holding company" means a parent undertaking, which

is not a mixed financial holding company, the main business of

which is to acquire and hold participations in subsidiary

undertakings, where those subsidiary undertakings are exclusively

or mainly authorised insurance undertakings, authorised

reinsurance undertakings, European insurance undertakings,

European reinsurance undertaking, third country insurance

undertakings or third country reinsurance undertakings, at least one

of such subsidiary undertakings being an authorised insurance

undertaking, an authorised reinsurance undertaking, a European

insurance undertaking or a European reinsurance undertaking;

"mixed financial holding company" has the same meaning as that

assigned to the term in regulation 2 of the Financial Conglomerates

Regulations;

"participating undertaking" means an undertaking which is either

a parent undertaking or other undertaking which holds a

participation or an undertaking linked with another undertaking by

*see regulation 1(3) of these Regulations as originally promulgated.

a relationship as set out in Article 22 of Directive 2013/34/EU of

the European Parliament and of the Council of 26 June 2013 on the

annual financial statements, consolidated financial statements and

related reports of certain types of undertakings, amending Directive

2006/43/EC of the European Parliament and of the Council and

repealing Council Directives 78/660/EEC and 83/349/EEC;

"Solvency II Directive" means Directive 2009/138/EC of the

European Parliament and of the Council of 25 November 2009 on

t he taki ng -u p and pu rsui t of t he b usi ness o f In surance and

Reinsurance (Solvency II) (recast), as amended from time to time,

and includes Directive 2014/51/EU of the European Parliament and

of the Council of 16 April 2014 amending Directives 2003/71/EC

and 2009/138/EC and Regulations (EC) No 1060/2009, (EU) No

1094/2010 and (EU) No 1095/2010 in respect of the powers of the

European Supervisory Authority (European Insurance and

Occupational Pensions Authority) and the European Supervisory

Authority (European Securities and Markets Authority) ("Omnibus

II"), any delegated acts and any technical standards that have been

or may be issued thereunder,

and the words and expressions which are used in these regulations

which are not defined herein shall have the same meaning as in the

Act.

(1) An authorised insurance undertaking or an authorised

reinsurance undertaking may, without prejudice to the information

to be provided in the report on the undertaking’s solvency and

financial condition, as determined in the Insurance Rules issued

under article 18F of the Act, when disclosing the amounts of the

Solvency Capital Requirement, opt not to disclose separately

(a) the capital add-on; or

(b) the impact of the specific parameters such undertaking

is required to use in accordance with Article 110 of the

Solvency II Directive,

for a transitional period ending no later than 31 December 2020.

(2) Where the competent authority is the group supervisor it

may opt, following consultation with the members of the college of

supervisors, to apply the transitional measure in sub-regulation (1)

where participating insurance and reinsurance undertakings,

insurance holding companies and mixed financial holding

companies which are subject to group supervision are required to

disclose publicly, on an annual basis, a report on the solvency and

financial condition at the level of the group.

An authorised insurance undertaking or an authorised

reinsurance undertaking shall apply a floor of 25% and a cap of

4 5 % e x c l u s i v e l y t o t h e u n d e r t a k i n g ’s S o l v e n c y C a p i t a l

Requirement, calculated in accordance with the standard formula as

set out in Insurance Rules issued under Article 15 of the Act for a

transitional period ending no later than 31 December 2017.

(1) By way of derogation from articles 18, 26(b), (d), (g),

(i), 27(1) and (5) and 28(1)(c) of the Act, where on the 31

De c e m b e r 2 01 5 a n au t h o r is e d in s ur a n c e u n d e r t a k i n g o r an

authorised reinsurance undertaking possesses the required solvency

margin referred to in Article 28 of the Directive 2002/83/EC,

Article 16a of Directive 73/239/EEC, or Article 37, 38 or 39 of

Directive 2005/68/EC respectively, but does not hold sufficient

eligible basic own funds to cover the Minimum Capital

Requirement, such authorised insurance or reinsurance undertaking

shall comply with article 17 of the Act by the 31 December 2016.

(2) Where an authorised insurance undertaking or an authorised

reinsurance undertaking fails to comply with article 17 of the Act,

within the period set out in sub-regulation (1), the competent

authority shall revoke the authorisation of the undertaking

concerned. In such a case, the provisions of articles 27 and 28 of

the Act shall apply mutatis mutandis.

(1) Where an authorised insurance undertaking or an

authorised reinsurance undertaking has on 1 January 2016 ceased

wholly to carry on business of insurance and is exclusively running

off or servicing that business, Titles I, II and III of the Solvency II

Directive shall not apply to it where the undertaking concerned

(a) has satisfied the competent authority that it will

complete the run off or servicing before 1 January

2019; or

(b) is subject to reorganisation measures in accordance

with article 41 of the Act, and the Insurance Business

(Reorganisation and Winding Up of Insurance

Undertakings) Regulations, and an administrator has

been appointed.

(2) Where the competent authority is not satisfied with the

progress that has been made

(a) towards completing the run off or servicing of the

business in the case referred to in sub-regulation

(1)(a), the undertaking shall be subject to Titles I, II

and III of the Solvency II Directive from 1 January

2019, or from an earlier date;

(b) in relation to the reorganisation measures in the case

referred to in sub-regulation (1)(b), the undertaking

shall be subject to Titles I, II and III of the Solvency II

Directive from 1 January 2021, or from an earlier date.

(3) The transitional measures in sub-regulations (1) and (2)

shall only apply to an authorised insurance undertaking or an

authorised reinsurance undertaking if the following conditions are

met

(a) the authorised insurance or reinsurance undertaking is

not part of a group, or if it is, all the undertakings that

are part of the group cease to carry on business of

insurance;

(b) the authorised insurance or reinsurance undertaking

shall provide the competent authority with an annual

INSURANCE BUSINESS

(SOLVENCY II TRANSITIONAL PROVISIONS)

report setting out what progress has been made in

terminating its activity; and

(c) the authorised insurance or reinsurance undertaking

has obtained the approval of the competent authority

to apply the transitional measures.

(4) The competent authority shall communicate a list of the

authorised insurance undertakings and authorised reinsurance

undertakings referred to in this regulation to all the Member States

and EEA States.

(1) The information which an authorised insurance

undertaking and an authorised reinsurance undertaking is required

to submit annually, in accordance with Insurance Rules issued

under article 32 of the Act, shall be submitted by no later than

(a) 20 weeks after the authorised insurance or reinsurance

undertaking’s financial year end in relation to its

financial year ending on or after 30 June 2016 but

before 1 January 2017;

(b) 18 weeks after the authorised insurance or reinsurance

undertaking’s financial year end in relation to its

financial year ending on or after 1 January 2017 but

before 1 January 2018;

(c) 16 weeks after the authorised insurance or reinsurance

undertaking’s financial year end in relation to its

financial year ending on or after 1 January 2018 but

before 1 January 2019;

(d) 14 weeks after the authorised insurance or reinsurance

undertaking’s financial year end in relation to its

financial year ending on or after 1 January 2019 but

before 1 January 2020.

(2) An authorised insurance undertaking and an authorised

reinsurance undertaking shall disclose the information referred to

in Insurance Rules issued under article 18F of the Act by no later

(a) 20 weeks after the authorised insurance or reinsurance

undertaking’s financial year end in relation to its

financial year ending on or after 30 June 2016 but

before 1 January 2017;

(b) 18 weeks after the authorised insurance or reinsurance

undertaking’s financial year end in relation to its

financial year ending on or after 1 January 2017 but

before 1 January 2018;

(c) 16 weeks after the authorised insurance or reinsurance

undertaking’s financial year end in relation to its

financial year ending on or after 1 January 2018 but

before 1 January 2019;

(d) 14 weeks after the authorised insurance or reinsurance

undertaking’s financial year end in relation to its

financial year ending on or after 1 January 2019 but

before 1 January 2020.

(3) The information which an authorised insurance undertaking

and an authorised reinsurance undertaking is required to submit on

a quarterly basis in accordance with Insurance Rules issued under

article 32 of the Act shall be submitted by no later than

(a) 8 weeks related to any quarter ending on or after 1

January 2016 but before 1 January 2017;

(b) 7 weeks related to any quarter ending on or after 1

January 2017 but before 1 January 2018;

(c) 6 weeks related to any quarter ending on or after 1

January 2018 but before 1 January 2019;

(d) 5 weeks related to any quarter ending on or after 1

January 2019 but before 1 January 2020.

(1) Where group supervision applies in accordance with

regulation 3 of the Insurance Business (Supervision of Insurance

and Reinsurance Undertakings in a Group) Regulations, the

submission of the annual quantitative templates pursuant to Article

254 of the Solvency II Directive shall be submitted by not later

than

(a) 26 weeks after the financial year end of the

participating insurance or reinsurance undertaking, the

ultimate insurance holding company or the ultimate

mixed financial holding company in relation to its

financial year ending on or after 30 January 2016 but

before 1 January 2017;

(b) 24 weeks after the financial year end of the

participating insurance or reinsurance undertaking, the

ultimate insurance holding company or the ultimate

mixed financial holding company in relation to its

financial year ending on or after 1 January 2017 but

before 1 January 2018;

(c) 22 weeks after the financial year end of the

participating insurance or reinsurance undertaking, the

ultimate insurance holding company or the ultimate

mixed financial holding company in relation to its

financial year ending on or after 1 January 2018 but

before 1 January 2019;

(d) 20 weeks after the financial year end of the

participating insurance or reinsurance undertaking, the

ultimate insurance holding company or the ultimate

mixed financial holding company in relation to its

financial year ending on or after 1 January 2019 but

before 1 January 2020.

(2) Where group supervision applies in accordance with

regulation 3 of the Insurance Business (Supervision of Insurance

and Reinsurance Undertakings in a Group) Regulations, the

submission of the group solvency and financial condition report

pursuant to Article 256 of the Solvency II Directive shall be

submitted by no later than

(a)

26 weeks after the financial year end of the

participating insurance or reinsurance undertaking, the

ultimate insurance holding company or the ultimate

mixed financial holding company in relation to its

financial year ending on or after 30 January 2016 but

before 1 January 2017;

(b) 24 weeks after the financial year end of the

participating insurance or reinsurance undertaking, the

ultimate insurance holding company or the ultimate

mixed financial holding company in relation to its

financial year ending on or after 1 January 2017 but

before 1 January 2018;

(c) 22 weeks after the financial year end of the

participating insurance or reinsurance undertaking, the

ultimate insurance holding company or the ultimate

mixed financial holding company in relation to its

financial year ending on or after 1 January 2018 but

before 1 January 2019;

(d) 20 weeks after the financial year end of the

participating insurance or reinsurance undertaking, the

ultimate insurance holding company or the ultimate

mixed financial holding company in relation to its

financial year ending on or after 1 January 2019 but

before 1 January 2020.

(3) Where group supervision applies in accordance with

regulation 3 of the Insurance Business (Supervision of Insurance

and Reinsurance Undertakings in a Group) Regulations, the

submission of the quarterly quantitative templates pursuant to

Article 254 of the Solvency II Directive shall be submitted by not

later than

(a) 14 weeks related to any quarter ending on or after 1

January 2016 but before 1 January 2017;

(b) 13 weeks related to any quarter ending on or after 1

January 2017 but before 1 January 2018;

(c) 12 weeks related to any quarter ending on or after 1

January 2018 but before 1 January 2019;

(d) 11 weeks related to any quarter ending on or after 1

January 2019 but before 1 January 2020.

(4) Notwithstanding sub-regulations (2) and (3) of regulation 9

of the Insurance Business (Supervision of Insurance and

Reinsurance Undertakings in a Group) Regulations, where an

authorised insurance undertaking or an authorised reinsurance

undertaking is subject to group supervision, the transitional

measures referred to in sub-regulations (1), (2) and (3) shall apply

mutatis mutandis.

(1) Notwithstanding Article 94 of the Solvency II

Directive, basic own fund items held by an authorised insurance

undertaking or an authorised reinsurance undertaking shall be

included in Tier 1 for up to 10 years after 1 January 2016, provided

that those items

(a) were issued prior to 1 January 2016 or prior to the

entry into force of the delegated acts and regulatory

technical standards referred to in Article 97 of the

Solvency II Directive, whichever is the earlier;

(b) on the 31 December 2015 could be used to meet the

available solvency margin up to 50% of the solvency

margin according to Article 16(3) of Directive 73/239/

EEC, Article 1 of Directive 2002/13/EC, Article 27(3)

of Directive 2002/83/EC and Article 36(3) of Directive

2005/68/EC;

(c) would not otherwise be classified in Tier 1 or Tier 2 in

accordance with Article 94 of the Solvency II

Directive.

(2) Notwithstanding Article 94 of the Solvency II Directive,

basic own fund items held by an authorised insurance undertaking

or an authorised reinsurance undertaking shall be included in Tier 2

basic own funds for up to 10 years after 1 January 2016, provided

that those items

(a) were issued prior to 1 January 2016 or prior to the

entry into force of the delegated acts and regulatory

technical standards referred to in Article 97 of the

Solvency II Directive, whichever is the earlier;

(b) on the 31 December 2015 could be used to meet the

available solvency margin up to 25% of the solvency

margin according to Article 16(3) of Directive 73/239/

EEC, Article 1 of Directive 2002/13/EC, Article 27(3)

of Directive 2002/83/EC and Article 36(3) of Directive

2005/68/EC.

(3) Notwithstanding sub-regulations (2) and (3) of regulation 9

of the Insurance Business (Supervision of Insurance and

Reinsurance Undertakings in a Group) Regulations, where an

authorised insurance undertaking or an authorised reinsurance

undertaking is subject to group supervision, the transitional

measures referred to in sub-regulations (1) and (2) shall apply

mutatis mutandis at the level of the group.

(1) Where an authorised insurance undertaking or an

authorised reinsurance undertaking invests in tradeable securities

or other financial instruments based on repackaged loans that were

issued before the 1 January 2011, the requirements referred to in

Article 135(2) of the Solvency II Directive shall apply only in

circumstances where new underlying exposures were added or

substituted after the 31 December 2014.

(2) Notwithstanding sub-regulations (2) and (3) of regulation 9

of the Insurance Business (Supervision of Insurance and

Reinsurance Undertakings in a Group) Regulations, where an

authorised insurance undertaking or authorised reinsurance

undertaking is subject to group supervision, the transitional

measure referred to in sub-regulation (1) shall apply mutatis

mutandis at the level of the group.

(1) Notwithstanding the Solvency Capital Requirement in

accordance with Articles 100, 101(3) and 104 of the Solvency II

Directive, the standard parameters to be used when calculating the

concentration risk sub-module and the spread risk sub-module in

accordance with the standard formula shall be adjusted as follows

(a) until the 31 December 2017, the standard parameters

shall be the same in relation to exposures to Member

States’ or EEA States’ central governments or central

banks denominated and funded in the domestic

currency of any Member State or EEA State as the

ones that would be applied to such exposures

denominated and funded in their domestic currency;

(b) from 1 January 2018, the standard parameters shall be

reduced by 80% in relation to exposures to Member

States’ or EEA States’ central governments or central

banks denominated and funded in the domestic

currency of any other Member State or EEA State;

(c) from 1 January 2019, the standard parameters shall be

reduced by 50% in relation to exposures to Member

States’ or EEA States’ central governments or central

banks denominated and funded in the domestic

currency of any other Member State or EEA State;

(d) from 1 January 2020, the standard parameters shall not

be reduced in relation to exposures to Member States’

or EEA States’ central governments or central banks

denominated and funded in the domestic currency of

any other Member State or EEA State.

(2) Notwithstanding sub-regulations (2) and (3) of regulation 9

of the Insurance Business (Supervision of Insurance and

Reinsurance Undertakings in a Group) Regulations, where an

authorised insurance or reinsurance undertaking is subject to group

supervision, the transitional measure referred to in sub-regulation

(1) shall apply mutatis mutandis at the level of the group.

(1) Notwithstanding the Solvency Capital Requirement in

accordance with Articles 100, 101(3) and 104 of the Solvency II

Directive, the standard parameters to be used for equities that an

authorised insurance undertaking or an authorised reinsurance

undertaking purchased on or before 1 January 2016, when

calculating the equity risk sub-module in accordance with the

standard formula shall be calculated as the weighted averages of

(a) the standard parameter to be used when calculating the

equity risk sub-module in accordance with sub-

regulation (3);

(b) the standard parameter to be used when calculating the

equity risk sub-module in accordance with the

standard formula.

(2) The weight for the parameter expressed in sub-regulation

(1)(b) shall increase at least linearly at the end of each year from

0% during 2016 up to 100% on 1 January 2023.

(3) The equity risk sub-module, for the purposes of sub-

regulation (1)(a) shall be calibrated using a Value-at-Risk measure,

over a time period, which is consistent with the typical holding

period of equity investments for the undertaking concerned, with a

confidence level providing the policyholders and beneficiaries with

a level of protection equivalent to that set out in Article 101 of the

Solvency II Directive.

(1) Notwithstanding Article 138(3) of the Solvency II

Directive and without prejudice to Article 138(4) of the said

Directive, an authorised insurance undertaking or an authorised

reinsurance undertaking which complies with the Required

Solvency Margin in accordance with Article 16a of Directive 73/

239/EEC, Article 28 of Directive 2002/83/EC or Article 37, 38 or

39 of Directive 2005/68/EC on the 31 December 2015, but does not

comply with the Solvency Capital Requirement in the first year of

application of the Solvency II Directive, the competent authority

shall require the undertaking concerned to

(a)

take the necessary measures to achieve 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 by the 31 December

2017;

(b) submit a progress report, every three months setting

out the measures taken and the progress made to

establish the level of eligible own funds covering the

Solvency Capital Requirement or the reduction of the

risk profile to ensure compliance with the Solvency

Capital Requirement.

(2) Where the progress report referred to in sub-regulation (1)

shows that there was no significant progress in achieving the re-

establishment of the level of eligible own funds covering the

Solvency Capital Requirement or the reduction of the risk profile to

ensure compliance with the Solvency Capital Requirement,

between the date of the observation of non-compliance of the

Solvency Capital Requirement and the date of the submission of the

progress report, the extension referred to in sub-regulation (1)(a)

shall be withdrawn.

(3) Notwithstanding sub-regulations (1) to (4) and (5)(d) of

regulation 9 and regulation 11(b) of the Insurance Business

(Supervision of Insurance and Reinsurance Undertakings in a

Group) Regulations, the transitional measure referred to in sub-

regulation (1) shall apply mutatis mutandis at the level of the

group, and where the participating insurance or reinsurance

undertakings or the authorised insurance undertaking and

authorised reinsurance undertakings in a group comply with the

Adjusted Solvency referred to in Article 9 of Directive 98/78/EC,

but do not comply with the group Solvency Capital Requirement.

Where an authorised insurance undertaking or an authorised

reinsurance undertaking and the ultimate parent insurance or

reinsurance undertaking are both established in Malta, the ultimate

parent undertaking may, during a period until the 31 March 2022,

apply to the competent authority for the approval of an internal

group model applicable to this part of the group, if this forms a

distinct part having a significantly different risk profile from the

rest of the group.

(1) An authorised insurance undertaking or an authorised

reinsurance undertaking may, subject to the prior approval of the

competent authority, apply a transitional adjustment to the relevant

risk-free interest rate term structure with respect to admissible

insurance and reinsurance obligations.

(2) Where the authorised insurance undertaking or authorised

reinsurance undertaking has received an approval pursuant to sub-

regulation (1), such undertaking shall calculate the adjustment for

each currency as a portion of the difference between

(a) the interest rate as determined by the authorised

insurance or reinsurance undertaking in accordance

with Article 20 of Directive 2002/83/EC as at 31

December 2015; and

(b) the annual effective rate, calculated as the single

discount rate that, where applied to the cash flows of

the portfolio of admissible insurance and reinsurance

obligations, results in a value that is equal to the value

of the best estimate of the portfolio of admissible

insurance and reinsurance obligations where the time

value of money is taken into account using the relevant

risk-free interest rate term structure referred to in

Article 77(2) of the Solvency II Directive.

(3) Where the authorised insurance undertaking or authorised

reinsurance undertaking has received an approval pursuant to sub-

regulation (1), the interest rate structure referred to in sub-

regulation (2)(a) shall be determined using the methods used by the

authorised insurance or reinsurance undertaking as at 31 December

2015. This portion shall decrease linearly at the end of each year

from 100% during the year starting from 1 January 2016 to 0% on 1

January 2032.

(4) Where an authorised insurance undertaking and authorised

reinsurance undertaking applies the volatility adjustment pursuant

to Article 77d of the Solvency II Directive, the relevant risk-free

interest rate term structure referred to in sub-regulation (2)(b) shall

be the adjusted relevant risk-free interest rate term structure set out

in Article 77d of the Solvency II Directive.

(5) An authorised insurance undertaking or an authorised

reinsurance undertaking which applies the risk-free interest rate

term structure pursuant to sub-regulation (1) shall comprise only of

those insurance or reinsurance obligations that meet the following

requirements

(a) the contracts that give rise to the insurance and

reinsurance obligations were concluded before the 31

December 2015, excluding contract renewals on or

after that date;

(b) until the 31 December 2015, technical provisions for

insurance and reinsurance obligations were determined

in accordance with Article 20 of Directive 2002/83/EC

as at the last date of application of the said Directive;

(c) Article 77b of the Solvency II Directive is not applied

to insurance and reinsurance obligations.

(6) An authorised insurance undertaking or an authorised

reinsurance undertaking which applies the risk-free interest rate

pursuant to sub-regulation (1) shall

(a) not include the admissible insurance and reinsurance

obligations in the calculation of the volatility

adjustment pursuant to Article 77d of the Solvency II

Directive;

(b) not apply regulation 16;

(c) as part of their report on their solvency and financial

condition referred to in Insurance Rules issued

pursuant to article 18F of the Act, publicly disclose

that they apply the transitional risk-free interest rate

term structure, and the quantification of the impact of

not applying this transitional measure on their

financial position.

(1) An authorised insurance undertaking or an authorised

reinsurance undertaking may subject to the prior approval of the

competent authority

(a) apply a transitional deduction to its technical

provisions or to such of its technical provisions as are

contained within homogeneous risk groups as referred

to in Article 80 of the Solvency II Directive;

(b) or on the request of the competent authority,

recalculate the amount of technical provisions,

including where applicable the amount of volatility

adjustment, used to calculate the transitional deduction

pursuant to sub-regulation (3) every 24 months, or

more frequently where the risk profile of the

undertaking has materially changed.

(2) The transitional deduction shall correspond to a portion of

the difference between the following two amounts

(a) the technical provisions after deduction of the amounts

recoverable

from

reinsurance

contracts

and

reinsurance special purpose vehicles, calculated in

accordance with Article 76 of the Solvency II

Directive as at 1 January 2016;

(b) the technical provisions after deduction of the amounts

recoverable from reinsurance contracts calculated in

accordance with Article 15 of Directive 73/239/EC,

Article 20 of Directive 2002/83/EC and Article 32 of

Directive 2005/68/EC as at 31 December 2015.

(3) The competent authority may limit the deduction referred to

in sub-regulation (2) if its application could result in a reduction of

the financial resources requirements that apply to the insurance or

reinsurance undertaking when compared with those calculated in

accordance with Directive 73/239/EEC, Directive 2002/83/EC and

Directive 2005/68/EC on 31 December 2015.

(4) The maximum portion deductible shall decrease linearly at

the end of each year from 100% during the year starting from 1

January 2016 to 0% on 1 January 2032.

(5) Where an authorised insurance undertaking or an authorised

reinsurance undertaking applies on 1 January 2016 the volatility

adjustment referred to in Article 77d of the Solvency II Directive,

the amount referred to in sub-regulation (2)(a) shall be calculated

with the volatility adjustment at that date.

(6) An authorised insurance or reinsurance undertaking

applying the transitional deduction referred to in sub-regulation

(1)(a) shall

(a) not apply regulation 15;

(b) when such undertaking does not comply with the

Solvency Capital Requirement without the application

of the transitional deduction, submit annually a report

to the competent authority setting out measures taken

and the progress made to re-establish at the end of the

transitional period set out in sub-regulation (2) a level

of eligible own funds covering the Solvency Capital

Requirement or to reduce its risk profile to restore

compliance with the Solvency Capital Requirement;

(c) as part of its report on its solvency and financial

condition referred to in Insurance Rules issued

pursuant to article 18F of the Act, publicly disclose

that it applies the transitional deduction to the

technical provisions, and the quantification of the

impact of not applying that transitional deduction on

its financial position.

(1) An authorised insurance undertaking and an authorised

reinsurance undertaking which has obtained the approval of the

competent authority to apply the transitional measures in regulation

15 or 16 shall

(a) immediately inform the competent authority as soon as

such undertaking observes that it would not comply

with the Solvency Capital Requirement without the

application of these transitional measures;

(b) take the measures necessary to ensure compliance with

the Solvency Capital Requirement by 1 January 2032;

and

(c) within two months from the observation of non-

compliance with the Solvency Capital Requirement

without the application of these transitional measures,

submit a phasing-in plan to the competent authority.

(2) The phasing-in plan which an authorised insurance

undertaking and an authorised reinsurance undertaking is required

to submit for the purposes of sub-regulation (1)(c) shall set out the

planned measures 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 by 1 January 2032.

(3) Where an authorised insurance undertaking and an

authorised reinsurance undertaking updates its phasing-in plan

during the transitional period, it shall submit the updated phasing-

in plan to the competent authority.

(4) An authorised insurance undertaking and an authorised

reinsurance undertaking which has obtained the approval of the

competent authority to apply the transitional measures in regulation

15 or 16 and has informed the competent authority that it would not

comply with the Solvency Capital Requirement without the

application of these transitional measures, shall submit annually a

report to the competent authority setting out the measures taken and

the progress made to ensure compliance with the Solvency Capital

Requirement by 1 January 2032.

(5) The competent authority shall revoke the approval for the

application of the transitional measure obtained pursuant to

regulations 15 or 16 where the progress report shows that the

compliance with the Solvency Capital Requirement by 1 January

2032 is unrealistic.