(1)

Experience gained by insurance and reinsurance undertakings during the first years of application of Directive 2009/138/EC should be used to review the methods, assumptions and standard parameters when calculating the Solvency Capital Requirement standard formula.

(2)

The Commission proposal for a new Regulation establishing the InvestEU Programme (2) focusses on addressing EU-wide market failures and sub-optimal investment situations. That proposal includes the establishment of the InvestEU Advisory Hub that should support the development of a robust pipeline of investment projects and the InvestEU Portal that should provide investors with an easily accessible and user-friendly database of investment projects. InvestEU will thereby support investments in finance for small and medium-sized businesses in the form of bonds, loans or private equity as well as other long-term investments in equity. The standard formula for the calculation of the Solvency Capital Requirement does not provide for specific rules for investments in privately placed debt, private equity and long-term investments in equity. In light of the expected improvement in the accessibility of such investments by means of the InvestEU portal, such specific rules should be introduced. In addition, in light of the Action Plan on Building a Capital Markets Union of 30 September 2015, more investments in Europe should be encouraged and access to equity and debt funding for European small and medium-sized enterprises should be facilitated. The prudential treatment of private equity and privately placed debt should therefore be amended to remove unjustified barriers to investments in those asset classes.

(3)

In order to ensure a level playing field between economic operators active in the insurance sector and economic operators active in other financial sectors, some of the provisions applicable to insurance and reinsurance undertakings should be aligned with the provisions applicable to credit and financial institutions, to the extent that such an alignment is commensurate with their different business models.

(4)

Trade exposures to qualifying central counterparties (CCPs) benefit from the multilateral netting and loss-sharing mechanism provided by qualifying CCPs. Those trade exposures have lowered counterparty credit risk and should therefore be subject to lower own funds requirement than exposures to counterparties not benefiting from CCP mechanisms. In accordance with Article 111(1)(fa) of Directive 2009/138/EC, the calculation of counterparty default risk with the standard formula should treat trade exposures to qualifying CCPs in a manner that is consistent with the capital requirements for such exposures applicable to credit institutions and financial institutions.

(5)

In order to contribute to the Union's objective of long-term sustainable growth, investments by insurers in privately placed debt should be facilitated. To that end, criteria should be established that allow for the assignment to credit quality steps 2 or 3 of bonds and loans for which a credit assessment by a nominated ECAI is not available, on the basis of the insurance or reinsurance undertaking's own internal credit assessment.

(6)

Substantial changes in the data used for the determination of the technical information on the relevant risk-free interest rate term structures may lead to a situation where data sources that were used in the past are no longer available. Furthermore, improved data availability may render obsolete the techniques used for the determination of the technical information on the relevant risk-free interest rate term structures. A substantial change in market conditions may also necessitate a re-assessment of parameters, including the ultimate forward rate, the starting point for the extrapolation of risk-free interest rates or the convergence period to the ultimate forward rate. Conditions should therefore be laid down to assess whether potential changes to data and techniques used for the determination of the technical information on the relevant risk-free interest rate term structure are commensurate with the objectives of transparency, prudence, reliability and consistency of the methods to determine the technical information on the relevant risk-free rate term structure over time. To this end, EIOPA should submit to the Commission an assessment of the impact of modified techniques, data specifications or parameters and the proportionality of the modification with respect to the substantial change in the data.

(7)

The objective of transparent, prudent, reliable and consistent methods to determine the technical information on the relevant risk-free interest rate term structures over time should also apply at the level of the components, and in particular, the volatility adjustment. In order to ensure transparency, prudence, reliability and consistency over time, the method to determine the technical information on the volatility adjustment applied by the European Insurance and Occupational Pensions Authority (EIOPA), in particular the activation of the country component as set out in Article 77d(4) of Directive 2009/138/EC, should be re-examined where evidence shows that the method fails to meet the objectives, and as part of the Commission review under Article 77f(3) of Directive 2009/138/EC.

(8)

Own–fund items in the form of paid-in subordinated mutual member accounts, paid-in preference shares and the related share premium account, and paid in subordinated liabilities, may provide for a partial principal loss absorbency mechanism for cases where the Solvency Capital Requirement is breached during three consecutive months. Criteria should be established that specify to what extent such items qualify as Tier 1 own funds.

(9)

Losses of basic own funds due to tax effects when the principal loss-absorbing mechanism is triggered should be avoided. Insurance and reinsurance undertakings should therefore be able to request a waiver of the application of that mechanism. Before granting the waiver however, supervisory authorities should assess whether there is a high and credible likelihood that the tax effects of the mechanism could significantly weaken the solvency position of an insurance or reinsurance undertaking.

(10)

A level playing field between economic operators in the insurance sector and in other financial sectors should be ensured. Insurance and reinsurance undertakings should therefore have the possibility, subject to prior supervisory approval, to repay or redeem an own-fund item within the first five years after the date of its issuance in case there is an unexpected change in the regulatory classification of the own-fund item which is likely to result in the exclusion of that item from the own funds, or in case there is an unexpected change in the applicable tax treatment of that item.

(11)

The look-through approach should ensure that the risks the insurance or reinsurance undertaking is exposed to are properly captured, irrespective of the undertaking's investment structures. That approach should therefore be applied to undertakings related to that insurance or reinsurance undertaking, that have as their main purpose the holding or management of assets on behalf of that insurance or reinsurance undertaking.

(12)

Where the look-through approach cannot be applied to a collective investment undertaking or investment packaged as funds, insurance or reinsurance undertakings should be allowed to use a simplified approach based on the last reported asset allocation of the collective investment undertaking or fund, provided that that simplified approach is proportionate to the nature, scale and complexity of the risks concerned.

(13)

The lapse risk sub-modules require complex calculations based on the level of single insurance policies. Where such complexity is not proportionate to the nature, scale and complexity of the risks falling under those sub-modules, it should be possible to base the calculations for those sub-modules on groupings of insurance policies, rather than on single insurance policies, unless such groupings would lead to a material error.

(14)

The calculation of natural catastrophe risk with the standard formula should account for the nature, scale and complexity of the exposure of the insurance or reinsurance undertakings to that risk. The calculation of natural catastrophe risk with the standard formula requires that insurance and reinsurance undertakings map their sum insured in risk zones. Not all insurance and reinsurance undertakings have the information on risk zone level required for that calculation in their internal systems, and for those undertakings it may be costly to produce this information. Those undertakings should therefore be able to base their calculation on groupings of risk zones where such grouping is well substantiated and proportionate to the exposure.

(15)

The calculation of the capital requirement for the fire risk sub-module of the standard formula requires that insurance and reinsurance undertakings identify the largest fire risk concentration. In order to limit the calculation burden, insurance or reinsurance undertakings should be able to restrict their identification process for the largest fire risk concentration to the surroundings of their largest fire risk exposures, provided that that approach is proportionate to the nature, scale and complexity of the exposure to fire risk of the insurance or reinsurance undertakings.

(16)

The simplified calculations of the capital requirement for life and health mortality risk sub-modules of the standard formula should be amended to reflect that the capital at risk of insurance policies may vary over time.

(17)

The cost for acquiring ratings for the calculation of the Solvency Capital Requirement using the standard formula should be proportionate to the nature, scale and complexity of the associated asset risk. Insurance and reinsurance undertakings that have nominated an external credit rating agency should therefore be able to use a simplified calculation for those parts of the debt portfolio for which external ratings are not provided by the that external credit rating agency.

(18)

The standard formula calculation of the Solvency Capital Requirement for counterparty default risk requires insurance and reinsurance undertakings to take into account the share of the counterparty's assets that are subject to collateral arrangements. A disproportionate burden in the calculation with the standard formula should be avoided. Insurance and reinsurance undertakings using the standard formula for the calculation of the Solvency Capital Requirement for counterparty default risk should therefore be able to calculate the Solvency Capital Requirement for counterparty default risk on the basis of the assumption that more than 60 % of the counterparty's assets are subject to collateral arrangements.

(19)

Insurance and reinsurance undertakings using the standard formula for the calculation of the Solvency Capital Requirement for counterparty default risk have to use a specific formula for the calculation of the capital requirement for counterparty default risk on type 1 exposures where the standard deviation of the loss distribution of type 1 exposures is lower than 7 %. Disproportionate burden when calculating that requirement should be avoided. Insurance and reinsurance undertakings should therefore be able to calculate the capital requirement for counterparty default risk on type 1 exposures using the same formula that is applied where the standard deviation of the loss distribution for type 1 exposures is between 7 % and 20 %.

(20)

The calculation of the risk mitigating effect on underwriting risk is complex and may be a disproportionate burden for insurance and reinsurance undertakings operating in non-life lines of business. It is therefore appropriate to enable insurance and reinsurance undertakings to use a simplified formula, provided that the use of that simplified formula is proportionate to the nature scale and complexity of the undertakings' counterparty risk profile.

(21)

The risk charge for premiums for future contracts should not unduly penalise contracts with an initial term of more than one year in order to take into account the lower risk associated to future premiums from contracts with longer terms. Therefore, for future contracts the term of which is more than one year, the volume measure for non-life and NSLT health premium and reserve risk should account for only 30 % of future premiums.

(22)

The actual risk exposure of the undertaking in the calculation of the Solvency Capital Requirement for natural catastrophe risk should be reflected in the calculation of the Solvency Capital Requirement with the standard formula. The calculation of the Solvency Capital Requirement for natural catastrophe risk with the standard formula should therefore take into account contractual limits for the compensation for natural catastrophes.

(23)

The calculation of the Solvency Capital Requirement for man-made catastrophe risk should reflect the risks that insurance and reinsurance undertakings are exposed to. The scenario-based calculations of that requirement for marine, aviation and fire risk should therefore be based on the largest exposures, after deduction of amounts recoverable from reinsurance or special purpose vehicles.

(24)

It is not appropriate to apply the tanker collision scenario of the marine risk submodule to pleasure craft or rigid inflatable boats. That scenario should therefore only be applicable to vessels with a minimum sum insured of at least EUR 250 000.

(25)

Direct investments by insurers in unlisted equity can contribute to the Union's objective of long-term sustainable growth. Those investments should therefore be facilitated. When calculating the capital requirement for equity risk with the standard formula, portfolios of high-quality unlisted equity investments should therefore be able to benefit from the same treatment as equities that are listed in regulated markets. Criteria should be established to ensure that a high-quality unlisted equity portfolio has a sufficiently small systematic risk.

(26)

Insurers have an important role as long-term investors and equity investments are important for the financing of the real economy. Long-term equity investments by insurance and reinsurance undertakings should therefore be encouraged by aligning the treatment of long-term equity investments and strategic equity investments when calculating the Solvency Capital Requirement with the standard formula including the correlation matrices. To ensure the long-term character of the investments, a portfolio of long-term equity investments and other assets matching a portfolio of clearly identified insurance or reinsurance obligations should be introduced within the equity risk sub-module. To avoid regulatory arbitrage, the portfolio of assets and the portfolio of obligations should have similar values, and each of them should not represent more than half of the total size of the balance sheet of the insurance or reinsurance undertaking.

(27)

Individual equities listed in the EEA and investments via certain types of funds should be treated in the same manner. Insurance and reinsurance undertakings should therefore be allowed to apply the rules applicable to long-term investments at the level of qualifying social entrepreneurship funds, qualifying venture capital funds, closed-ended and unleveraged alternative investment funds or European long-term investment funds, provided that the fund manager is authorised in the EEA.

(28)

The calculation of the capital requirement for the spread risk sub-module with the standard formula should not impede insurance or reinsurance undertakings from investing in high-quality private placements, which are often unrated. An insurance or reinsurance undertaking may have concluded an agreement with a credit institution or investment firm to co-invest in bonds and loans for which a credit assessment by a nominated ECAI is not available. In that case, the insurance or reinsurance undertaking should be allowed to use the results of the approved internal ratings based approach of that credit institution or investment firm to calculate the Solvency Capital Requirement, provided that that credit institution or investment firm has its head office in the European Economic Area. The same should apply where an insurance or reinsurance undertaking has concluded an agreement with another insurance or reinsurance undertaking that uses an approved internal model in accordance with Article 100 of Directive 2009/138/EC.

(29)

The legislation covering the financial sector should be consistent, while taking into account differences in the business model of the sectors, diverging elements in the determination of capital requirements, or other factors. Therefore, the rules for insurance and reinsurance undertakings for the recognition of guarantees that are issued by regional governments and local authorities should be aligned with the rules for credit institutions and investment firms.

(30)

Derivatives expose insurance and reinsurance undertakings to counterparty default risk, irrespective of whether those derivatives are held for hedging or speculation. All derivatives should therefore be treated as type 1 exposures in the counterparty default risk module of the standard formula.

(31)

Discrepancies in the sequence of the calculations for the capital requirement for market risk concentrations with the standard formula should be avoided. Individual exposures should therefore first be mapped to credit quality steps and relative excess exposure thresholds, and risk factors should subsequently be applied at the level of single name exposures.

(32)

Insurance and reinsurance undertakings should not use overly optimistic assumptions when projecting future taxable profits after an exceptional loss scenario. Therefore, when calculating with the standard formula the loss-absorbing capacity of deferred taxes, insurance and reinsurance undertakings should take into account their financial and solvency position after the instantaneous loss, and the increased uncertainty regarding the projection of future taxable profits. Furthermore, the assumptions for projecting future taxable profits following the instantaneous loss, including the assumed rates of return on the insurance or reinsurance undertaking's investments, should not be more favourable than the assumptions applied to the valuation of deferred taxes on the balance sheet, and the projected total amount of new business should not exceed that of the business planning. Insurance and reinsurance undertakings should only be allowed to assume higher returns than those implied in the relevant interest rate term structure where they can demonstrate that those returns will be realised after the instantaneous loss.

(33)

The calculation of the Solvency Capital Requirement with the standard formula should reflect developments in risk management practices, in particular on the use of risk mitigation techniques. Insurance and reinsurance undertakings should therefore be able to take into account the effect of risk-mitigation techniques, including where those techniques are replaced with a similar arrangement when they expire or where those techniques are adjusted to reflect changes in the exposures covered, provided that such replacement or adjustment is limited to once per week. The standard formula should also allow for netting arrangements between derivatives and hedging strategies where several contractual arrangements together have the effect of a risk mitigation technique. Possible deviations between the risk mitigating effect reflected in the standard formula on the one hand and the actual risk mitigation effect on the other, and an assessment of basis risk, should be included in the undertakings own risk and solvency assessment.

(34)

Insurance or reinsurance undertakings should not be disproportionately penalised where a reinsurance counterparty ceases to comply with its Solvency Capital Requirement while still complying with the Minimum Capital Requirement. Insurance and reinsurance undertakings should therefore be allowed, for a period of up to six months, to partially take into account the risk-mitigating effect of reinsurance arrangements entered into with that reinsurance counterparty. Where a reinsurance counterparty ceases to comply with its Minimum Capital Requirement, the insurance or reinsurance undertaking should no longer take into account any risk-mitigating effect from reinsurance arrangements entered into with that reinsurance counterparty.

(35)

Stop loss reinsurance contracts should receive a similar treatment as excess of loss reinsurance contracts in the calculation of the Solvency Capital Requirement with the standard formula. Insurance and reinsurance undertakings should therefore be able to take into account the risk mitigation provided by stop loss reinsurance contracts in the Solvency Capital Requirement standard formula calculation with undertaking-specific parameters by laying down a standardised method to calculate an undertaking-specific parameter to replace the standard parameter for non-proportional reinsurance.

(36)

The loss-absorbing capacity of deferred taxes has a significant impact on the solvency position of insurance and reinsurance undertakings. The administrative, management or supervisory body of insurance or reinsurance undertakings should therefore adopt a risk-management policy related to deferred taxes, which takes into account the loss-absorbing capacity of those deferred taxes. In particular, that policy should set out the responsibilities for assessing the underlying assumptions applied to the projection of future taxable profits.

(37)

The calculation of the Solvency Capital Requirement at solo and group level should be consistent. Where the look-through approach is applied at solo level to collective investment undertakings, or to investments packaged as funds which are related undertakings of a participating insurance or reinsurance undertaking, the look-through approach should also be applied at group level. Where those collective investment undertakings or funds are subsidiaries of insurance or reinsurance groups, the calculation of the Solvency Capital Requirement should be based on the assumption of full diversification with other consolidated assets and liabilities.

(38)

The calculation of the capital requirement for currency risk for a group should reflect the specific economic situation of that group, in particular in cases where the insurance or reinsurance activities are denominated in different currencies. For that reason, participating insurance and reinsurance undertakings, insurance holding companies or mixed financial holding companies should be able to select a reference currency other than the one used for the preparation of the consolidated accounts where the currency risk in the consolidated group Solvency Capital Requirement is calculated on the basis of the standard formula. That choice should be based on objective criteria, such as the currency in which a material amount of the group's technical provisions or own funds are denominated.

(39)

The standard formula calculation for the non-life premium and reserve risk sub-modules, the health premium and reserve risk sub-modules, and for the natural catastrophe risk sub-module, should be modified to reflect the recent empirical evidence on premium provisions and provisions for claims outstanding.

(40)

The complexity of the calculation of the capital requirement for mass accident and accident concentration should be proportionate to the nature, scale and complexity of the risk undertakings offering health insurance are exposed to. The event type referring to disability that lasts 10 years caused by an accident should therefore be removed from that calculation.

(41)

Commission Delegated Regulation (EU) 2015/35 (3) contains a number of typographical errors, such as wrong internal cross-references, which should be corrected.

(42)

In order to avoid disruptions in the non-life and health insurance market, in particular for insurance and reinsurance undertakings operating only in one line of business, sufficient time should be given to enable insurance and reinsurance undertakings to prepare for the changes in the calculation of the non-life and health premium and reserve risk. Those changes should therefore not apply before 1 January 2020.

(43)

Delegated Regulation (EU) 2015/35 should therefore be amended accordingly,

(1)

in Article 1, the following points 59 to 63 are added:

(*1)  Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, p. 1).’;"

(2)

Article 18 is amended as follows:

(3)

Article 43 is replaced by the following:

(4)

Article 71 is amended as follows:

(5)

in Article 73, the following paragraph 5 is added:

(6)

in Article 77, the following paragraph 5 is added:

(7)

Article 84 is amended as follows:

(8)

Article 88 is amended as follows:

(9)

the following Articles 90a, 90b and 90c are inserted:

(10)

Article 91 is amended as follows:

a)	the formula is replaced by the following: ‘ ’;

(11)

the following Article 95a is inserted:

(12)

the following Article 96a is inserted:

(13)

Article 97 is amended as follows:

(a)	the formula is replaced by the following: ‘ ’;

(14)

the following Article 102a is inserted:

(15)

the following Article 105a is inserted:

(*2)  Commission Implementing Regulation (EU) No 2015/2450 of 2 December 2015 laying down implementing technical standards with regard to the templates for the submission of information to the supervisory authorities according to Directive 2009/138/EC of the European Parliament and of the Council (OJ L 347/1, 2.12.2015, p. 1214).’;"

(16)

in Article 107(1), the introductory wording is replaced by the following:

‘Where both Article 88 is complied with and the best estimate of amounts recoverable from a reinsurance arrangement or securitisation and the corresponding debtors is not negative, insurance and reinsurance undertakings may calculate the risk-mitigating effect on underwriting risk of that reinsurance arrangement or securitisation referred to in Article 196 as follows:’;

(17)

in Article 108(1), the introductory wording is replaced by the following:

‘Where both Article 88 is complied with and the best estimate of amounts recoverable from a proportional reinsurance arrangement and the corresponding debtors for a counterparty i is not negative, insurance and reinsurance undertakings may calculate the risk-mitigating effect on underwriting risk j of the proportional reinsurance arrangement for counterparty i referred to Article 196 as follows:’;

(18)

Article 110 is replaced by the following:

(19)

in Article 111, point (a) is replaced by the following:

(20)

the following Article 111a is inserted:

‘Article 111a

Simplified calculation of the risk-mitigating effect on underwriting risk

For the purposes of Article 196, where Article 88 is complied with and the reinsurance arrangement, securitisation or derivative covers obligations from only one of the segments (segment s) set out in Annex II or, as applicable, Annex XIV, insurance and reinsurance undertakings may calculate the risk-mitigating effect of that reinsurance arrangement, securitisation or derivative on their underwriting risk as follows:

where:

a)

SCRCAT hyp denotes the hypothetical capital requirement for the non-life catastrophe underwriting risk module referred to in Article 119(2), or, as applicable, the hypothetical capital requirement for the health catastrophe risk sub-module referred to in Article 160, that would apply if the reinsurance arrangement, securitisation or derivative did not exist;

b)	SCRCAT without denotes the capital requirement for the non-life catastrophe underwriting risk module referred to in Article 119(2) or, as applicable, the capital requirement for the health catastrophe risk sub-module referred to in Article 160;

c)	σs denotes the standard deviation for non-life premium risk of segment s determined in accordance with Article 117(3) or, as applicable, the standard deviation for the NSLT health premium risk of segment s determined in accordance with Article 148(3);

d)	Ps hyp denotes the hypothetical volume measure for premium risk of segment s determined in accordance with Article 116(3) or (4), or, as applicable, Article 147(3) or (4), that would apply if the reinsurance arrangement, securitisation or derivative did not exist;

e)	Ps without denotes the volume measure for premium risk of segment s determined in accordance with Article 116(3) or (4) or, as applicable, Article 147(3) or (4);

f)	Recoverables denotes the best estimate of amounts recoverable from the reinsurance arrangement, securitisation or derivative and the corresponding debtors.’;

(21)

the following Articles 112a and 112b are inserted:

(22)

in Article 116(3), point (d) is replaced by the following:

(23)

Article 121 is amended as follows:

(a)	paragraph 5 is amended as follows: (i) the formula is replaced by the following: ‘ ’; (ii) point (a) is deleted;

(24)

Article 122 is amended as follows:

(a)

paragraph 2 is amended as follows: (i) the introductory sentence is replaced by the following: ‘For all regions set out in Annex VI, the capital requirement for earthquake risk in a particular region r shall be equal to the loss in basic own funds of insurance and reinsurance undertakings that would result from an instantaneous loss of an amount that, without deduction of the amounts recoverable from reinsurance contracts and special purpose vehicles, is equal to the following amount:’; (ii) the formula is replaced by the following: ‘ ’; (iii) point (a) is deleted;

(25)

Article 123 is amended as follows:

(a)	paragraph 5 is amended as follows: (i) the formula is replaced by the following: ‘ ’; (ii) point (a) is deleted;

(26)

Article 124 is amended as follows:

(a)	paragraph 5 is amended as follows: (i) the formula is replaced by the following: ‘ ’; (ii) point (a) is deleted;

(27)

Article 125 is amended as follows:

(a)	in paragraph 1, the formula is replaced by the following: ‘ ’;

(28)

Article 130 is replaced by the following:

‘Article 130

Marine risk sub-module

1.   The capital requirement for marine risk shall be equal to the following:

where:

a)	SCRvessel is the capital requirement for the risk of a vessel collision;

b)	SCRplatform is the capital requirement for the risk of a platform explosion.

2.   The capital requirement for the risk of a vessel collision shall be equal to the loss in basic own funds of insurance and reinsurance undertakings that would result from an instantaneous loss of an amount equal to the following:

L vessel = max v (SI (hull,v) + SI (liab,v)+ SI (pollution,v))

where:

(a)	the maximum relates to all sea, lake, river and canal vessels insured by the insurance or reinsurance undertaking in respect of vessel collision in lines of business 6, 18 and 27 set out in Annex I where the insured value of the vessel is at least EUR 250 000;

(b)	SI(hull,v) is the sum insured by the insurance or reinsurance undertaking, after deduction of the amounts that the insurance or reinsurance undertaking can recover from reinsurance contracts and special purpose vehicles, for marine hull insurance and reinsurance in relation to vessel v;

(c)	SI(liab,v) is the sum insured by the insurance or reinsurance undertaking, after deduction of the amounts that the insurance or reinsurance undertaking can recover from reinsurance contracts and special purpose vehicles, for marine liability insurance and reinsurance in relation to vessel v;

(d)	SI(pollution,v) is the sum insured by the insurance or reinsurance undertaking, after deduction of the amounts that the insurance or reinsurance undertaking can recover from reinsurance contracts and special purpose vehicles, for oil pollution insurance and reinsurance in relation to vessel v.

For the purposes of determining SI(hull,v) , SI(liab,v) and SI(pollution,v) , insurance and reinsurance undertakings shall only take into account reinsurance contracts and special purpose vehicles that would pay out in the event of insurance claims related to vessel v. Reinsurance contracts and special purpose vehicles where payout is dependent on insurance claims not related to vessel v shall not be taken into account.

Where the deduction of amounts recoverable would lead to a capital requirement for the risk of a vessel collision that captures insufficiently the risk of a vessel collision that the insurance or reinsurance undertaking is exposed to, the insurance or reinsurance undertaking shall calculate SI(hull,v) , SI(liab,v) or SI(pollution,v) without deduction of amounts recoverable.

3.   The capital requirement for the risk of a platform explosion shall be equal to the loss in basic own funds of insurance and reinsurance undertakings that would result from an instantaneous loss of an amount equal to the following:

L platform = max p (SI p )

where:

(a)	the maximum relates to all oil and gas offshore platforms insured by the insurance or reinsurance undertaking in respect of platform explosion in lines of business 6, 18 and 27 set out in Annex I;

(b)

SIp is the accumulated sum insured by the insurance or reinsurance undertaking, after deduction of the amounts that the insurance or reinsurance undertaking can recover from reinsurance contracts and special purpose vehicles, for the following insurance and reinsurance obligations in relation to platform p: (i) obligations to compensate for property damage; (ii) obligations to compensate for the expenses for the removal of wreckage; (iii) obligations to compensate for loss of production income; (iv) obligations to compensate for the expenses for capping of the well or making the well secure; (v) liability insurance and reinsurance obligations.

For the purposes of determining SIp , insurance and reinsurance undertakings shall only take into account reinsurance contracts and special purpose vehicles that would pay out in the event of insurance claims related to platform p. Reinsurance contracts and special purpose vehicles where payout is dependent on insurance claims that are not related to platform p shall not be taken into account.

Where the deduction of amounts recoverable would lead to a capital requirement for the risk of a platform explosion that captures insufficiently the risk of a platform explosion that the insurance or reinsurance undertaking is exposed to, the insurance or reinsurance undertaking shall calculate SIp without the deduction of amounts recoverable.’;

(29)

Article 131 is amended as follows:

(30)

in Article 132, paragraphs 1 and 2 are replaced by the following:

(31)

in Article 147(3), point (d) is replaced by the following:

(32)

in Article 168, paragraph 6 is amended as follows:

(33)

the following Article 168a is inserted:

‘Article 168a

Qualifying unlisted equity portfolios

1.   For the purposes of point (e) of Article 168(6), a qualifying unlisted equity portfolio is a set of equity investments that meets all of the following requirements:

(a)	the set of investments consists solely of investments in the ordinary shares of companies;

(b)	the ordinary shares of each of the companies concerned are not listed in any regulated market;

(c)	each company has its head office in a country which is a member of the EEA;

(d)	more than 50 % of the annual revenue of each company is denominated in currencies of countries which are members of the EEA or the OECD;

(e)	more than 50 % of the staff employed by each company have their principal place of work in countries which are members of the EEA;

(f)

each company fulfils at least one of the following conditions for each of the last three financial years ending prior to the date on which the Solvency Capital Requirement is being calculated: (i) the annual turnover of the company exceeds EUR 10 000 000; (ii) the balance sheet total of the company exceeds EUR 10 000 000; (iii) the number of staff employed by the company exceeds 50;

(g)	the value of the investment in each company represents no more than 10 % of the total value of the set of investments;

(h)

none of the companies is an insurance or reinsurance undertaking, a credit institution, an investment firm, a financial institution, an alternative investment fund manager, a UCITS management company, an institution for occupational retirement provision or a non-regulated undertaking carrying out financial activities;

(i)	the beta of the set of investments does not exceed 0,796.

2.   For the purposes of paragraph 1(i), the beta of a set of investments is the average of the betas for each of the investments in that set of investments, weighted by the book values of those investments. The beta of an investment in a company shall be determined as follows:

where:

(a)	β is the beta of the equity investment in the company;

(b)	GM is the average gross margin for the company over the last five financial years ending prior to the date on which the Solvency Capital Requirement is being calculated;

(c)	Debt is the total debt of the company at the end of the most recent financial year for which figures are available;

(d)	CFO is the average net cash-flow for the company from operations over the last five financial years ending prior to the date on which the Solvency Capital Requirement is being calculated;

(e)

ROCE is the average return on common equity for the company over the last five financial years ending prior to the date on which the Solvency Capital Requirement is being calculated. Common equity shall be understood as capital and reserves as referred to in Annex III to Directive 2013/34/EU of the European Parliament and of the Council (*4) excluding preference shares and the related share premium account.

(*4)  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 (OJ L 182, 29.6.2013, p. 19).’;"

(34)

Article 169 is replaced by the following:

(35)

the following Article 171a is inserted:

(36)

in Article 176, the following paragraph 4a is inserted:

(37)

the following Articles 176a to 176c are inserted:

(*5)  Commission Implementing Regulation (EU) 2016/1799 of 7 October 2016 laying down implementing technical standards with regard to the mapping of credit assessments of external credit assessment institutions for credit risk in accordance with Articles 136(1) and 136(3) of Regulation (EU) No 575/2013 of the European Parliament and of the Council (OJ L 275, 12.10.2016, p. 3)’;"

(38)

Article 180 is amended as follows:

(39)

Article 182 is amended as follows:

(40)

in Article 184, paragraph 3 is replaced by the following:

(41)

in Article 186, paragraphs 2 to 6 are deleted;

(42)

Article 187 is amended as follows:

(43)

Article 189 is amended as follows:

(44)

Article 192 is amended as follows:

(45)

the following Article 192a is inserted:

(46)

Article 196 is replaced by the following:

(47)

Article 197 is amended as follows:

(48)

in Article 199, the following paragraphs 12 and 13 are added:

(49)

in Article 201(2), point (a) is replaced by the following:

(50)

Article 207 is amended as follows: