25.3.2015   

EN

Official Journal of the European Union

L 79/18

(1)

Article 77b of Directive 2009/138/EC allows insurance and reinsurance undertakings to apply a matching adjustment to the relevant risk-free interest rate term structure, subject to prior approval by the supervisory authorities where certain conditions are met. Rules are to be established regarding the procedures to be followed for the approval of the application of a matching adjustment.

(2)

In order for an application to be considered complete, it should include all relevant information necessary for the assessment and decision by the supervisory authorities. To provide a harmonised basis for the assessment and decision by supervisory authorities, an application should include evidence demonstrating that each of the conditions set out in Article 77b of Directive 2009/138/EC have been met.

(3)

The application for a matching adjustment is a strategic decision for risk management and capital planning purposes. Based on the ultimate responsibility of the administrative, management or supervisory body for compliance as set out in Article 40 of Directive 2009/138/EC, its involvement in the decision-making process on the application should be carefully considered.

(4)

In addition to Article 77b of Directive 2009/138/EC, that Directive contains other requirements in Article 44, 45 and 77c which apply to all insurance or reinsurance undertakings using a matching adjustment. An application should therefore include evidence that all of these requirements will be satisfied if approval is granted.

(5)

The procedures to be followed for the approval of the matching adjustment envisage ongoing communication between the supervisory authorities and insurance and reinsurance undertakings. This includes communication before a formal application is submitted to the supervisory authorities and, after an application has been approved, through the supervisory review process. Such ongoing communication is necessary to ensure that supervisory judgements are based on relevant and up-to-date information and evidence.

(6)

To ensure a smooth and efficient process, supervisory authorities should be able to request that insurance and reinsurance undertakings make modifications to an application in order to address areas where the submitted evidence is insufficient to demonstrate compliance with the relevant conditions set by Article 77b of Directive 2009/138/EC, before deciding whether to finally accept or reject the application.

(7)

In addition to considering the evidence included within an application, supervisory authorities should also consider other factors that are relevant when reaching a decision as to whether the requirements of Directive 2009/138/EC have been satisfied.

(8)

Since matching portfolios may be managed on a going concern basis, undertakings that have received approval to use a matching adjustment to value the corresponding liabilities should also be allowed to use that adjustment to value future insurance obligations, to the extent that those obligations and the assets matching them possess the same features as the obligations and assets included in the initial matching portfolio and, consequently, entail the same risks for the undertaking concerned.

(9)

Due to interdependencies between different approval applications under Directive 2009/138/EC, when applying for approval of matching adjustment the insurance or reinsurance undertaking should inform the supervisory authority of other applications concerning items in Article 308a(1) of Directive 2009/138/EC, which are currently ongoing or foreseen within the next six months. Such requirement is necessary to ensure supervisory assessments are based on transparent and unbiased information.

(10)

This Regulation is based on the draft implementing technical standards submitted by the European Insurance and Occupational Pensions Authority to the European Commission.

(11)

The European Insurance and Occupational Pensions Authority has conducted open public consultations on the draft implementing technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the opinion of the Insurance and Reinsurance Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1094/2010 of the European Parliament and of the Council (2),

(12)

In order to enhance legal certainty about the supervisory regime during the phasing-in period provided for in Article 308a of Directive 2009/138/EC, which will start on 1 April 2015, it is important to ensure that this Regulation enters into force as soon as possible, on the day after that of its publication in the Official Journal of the European Union.

(a)

evidence that the assigned portfolio of assets meets all of the relevant conditions specified in Article 77b(1) of Directive 2009/138/EC;

(b)

details of the assets within the assigned portfolio, which shall consist of line-by-line asset information together with the procedure used to group such assets by asset class, credit quality and duration for the purposes of determining the fundamental spread referred to in paragraph 1(b) of Article 77c of Directive 2009/138/EC;

(c)

a description of the process used to maintain the assigned portfolio of assets in accordance with paragraph 1(a) of Article 77b of Directive 2009/138/EC, including the process for maintaining the replication of expected cash-flows where these have materially changed.

(a)

evidence that the insurance or reinsurance obligations meet all of the criteria specified in points (d), (e), (g) and (j) of paragraph 1 of Article 77b of Directive 2009/138/EC;

(b)

where mortality risk is present, quantitative evidence that the best estimate of the portfolio of insurance or reinsurance obligations does not increase by more than 5 % under the mortality risk stress specified in Article 52 of the Commission Delegated Regulation (EU) 2015/35 (3).

(a)

quantitative evidence that the criteria of paragraph 1(c) of Article 77b of Directive 2009/138/EC are met, including a quantitative and qualitative assessment of whether any mismatch gives rise to risks which are material in relation to the risks inherent in the insurance business to which the matching adjustment is intended to be applied;

(b)

evidence that adequate processes will be in place to properly identify, organise and manage the portfolio of obligations and assigned portfolio of assets separately from other activities of the undertaking, and to ensure that the assigned assets will not be used to cover losses arising from other activities of the undertaking, in accordance with paragraph 1(b) of Article 77b of Directive 2009/138/EC;

(c)

evidence of how the own funds will be adjusted in accordance with Article 81 of Directive 2009/138/EC to reflect any reduced transferability;

(d)

evidence of how the Solvency Capital Requirement (SCR) will be adjusted to appropriately reflect any reduced scope for risk diversification. Where relevant this shall include evidence of compliance with Articles 216, 217 and 234 of the Delegated Regulation (EU) 2015/35. Where insurance and reinsurance undertakings intend to calculate the Solvency Capital Requirement using an internal model but have not been granted the necessary supervisory approval, the evidence required by this paragraph shall be submitted on the basis of the standard formula result as well as the unapproved internal model.

(a)

confirmation that the conditions of Article 77b(3) of Directive 2009/138/EC will be met if supervisory approval to apply a matching adjustment is granted;

(b)

the liquidity plan required under Article 44(2) of Directive 2009/138/EC;

(c)

the assessments required under Article 44(2a)(b) of Directive 2009/138/EC;

(d)

the assessments required under Article 45(2a) of Directive 2009/138/EC;

(e)

a detailed explanation and demonstration of the calculation process used to determine the matching adjustment in accordance with the requirements of Article 77c of Directive 2009/138/EC;

(f)

a list of the other applications submitted by the insurance or reinsurance undertaking, or currently foreseen within the next six months, for approval of any of the items of the phasing-in listed in Article 308a(1) of Directive 2009/138/EC.

(a)

the change is due to a request from the supervisory authority for additional information or modifications; or

(b)

the supervisory authority is satisfied that the change does not significantly affect its assessment of the application.

(a)

the future obligations and assets have the same features as the obligations and assets included in the matching portfolio for which the approval was granted;

(b)

the matching portfolio continues to meet the relevant conditions of Directive 2009/138/EC.