Own funds
Article 87
Own funds shall comprise the sum of basic own funds, referred to in Article 88 and ancillary own funds referred to in Article 89.
Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (recast) (Text with EEA relevance) Subsection 1 — Determination of own funds
Basic own funds
Article 88
Basic own funds shall consist of the following items: (1) the excess of assets over liabilities, valued in accordance with Article 75 and Section 2; (2) subordinated liabilities. The excess amount referred to in point (1) shall be reduced by the amount of own shares held by the insurance or reinsurance undertaking.
Ancillary own funds
Article 89
1. Ancillary own funds shall consist of items other than basic own funds which can be called up to absorb losses. Ancillary own funds may comprise the following items to the extent that they are not basic own-fund items: (a) unpaid share capital or initial fund that has not been called up; (b) letters of credit and guarantees; (c) any other legally binding commitments received by insurance and reinsurance undertakings. In the case of a mutual or mutual-type association with variable contributions, ancillary own funds may also comprise any future claims which that association may have against its members by way of a call for supplementary contribution, within the following 12 months. 2. Where an ancillary own-fund item has been paid in or called up, it shall be treated as an asset and cease to form part of ancillary own-fund items.
Supervisory approval of ancillary own funds
Article 90
1. The amounts of ancillary own-fund items to be taken into account when determining own funds shall be subject to prior supervisory approval. 2. The amount ascribed to each ancillary own-fund item shall reflect the loss-absorbency of the item and shall be based upon prudent and realistic assumptions. Where an ancillary own-fund item has a fixed nominal value, the amount of that item shall be equal to its nominal value, where it appropriately reflects its loss-absorbency. 3. Supervisory authorities shall approve either of the following: (a) a monetary amount for each ancillary own-fund item; (b) a method by which to determine the amount of each ancillary own-fund item, in which case supervisory approval of the amount determined in accordance with that method shall be granted for a specified period of time. 4. For each ancillary own-fund item, supervisory authorities shall base their approval on an assessment of the following: (a) the status of the counterparties concerned, in relation to their ability and willingness to pay; (b) the recoverability of the funds, taking account of the legal form of the item, as well as any conditions which would prevent the item from being successfully paid in or called up; (c) any information on the outcome of past calls which insurance and reinsurance undertakings have made for such ancillary own funds, to the extent that information can be reliably used to assess the expected outcome of future calls.
Surplus funds
Article 91
1. Surplus funds shall be deemed to be accumulated profits which have not been made available for distribution to policy holders and beneficiaries. 2. In so far as authorised under national law, surplus funds shall not be considered as insurance and reinsurance liabilities to the extent that they fulfil the criteria set out in Article 94(1).
Implementing measures
Article 92
1. The Commission shall adopt implementing measures specifying the following: (a) the criteria for granting supervisory approval in accordance with Article 90; (b) the treatment of participations, within the meaning of the third subparagraph of Article 212(2), in financial and credit institutions with respect to the determination of own funds. Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 301(3). 2. Participations in financial and credit institutions as referred to in paragraph 1(b) shall comprise the following: (a) participations which insurance and reinsurance undertakings hold in: (i) credit institutions and financial institutions within the meaning of Article 4(1) and (5) of Directive 2006/48/EC, (ii) investment firms within the meaning of point 1 of Article 4(1) of Directive 2004/39/EC; (b) subordinated claims and instruments referred to in Article 63 and Article 64(3) of Directive 2006/48/EC which insurance and reinsurance undertakings hold in respect of the entities defined in point (a) of this paragraph in which they hold a participation.
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