According to the Solvency II Directive, the group solvency calculation can be carried out on the basis of a consolidation method (Article 320), a deduction and aggregation method (Article 233) or a combination of both methods, subject to the group supervisor’s approval.
The Opinion is of relevance for insurance groups that use the combination of methods, in particular those comprising undertakings situated in third countries whose solvency regimes are considered equivalent to Solvency II.
The Opinion aims to clarify certain issues related to the application of the combination of methods, such as the determination of the basis for tier limits used in the assessment of the own funds’ eligibility or certain aspects to be taken into account by the group supervisor when deciding on the use of a combination of methods.
When the combination of methods leads to unintended consequences, for example in the case where groups organise their funding through a central holding company, and if specific solutions need to be applied, EIOPA recommends certain conditions to be satisfied to ensure that the prudential concerns are duly addressed and that no group is placed in an advantageous position as compared to others.
EIOPA is going to monitor the development of the issues addressed in the Opinion.
EIOPA’s Opinion on the application of a combination of methods to the group solvency calculation can be viewed here.
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