Amending provisions
Article 1
Commission Delegated Regulation (EU) 2015/35 is amended as follows: (1) in Article 1, the following points 55a and 55b are inserted: ‘55a. “Infrastructure assets” means physical structures or facilities, systems and networks that provide or support essential public services. 55b. “Infrastructure project entity” means an entity which is not permitted to perform any other function than owning, financing, developing or operating infrastructure assets, where the primary source of payments to debt providers and equity investors is the income generated by the assets being financed.’; (2) Article 13 is amended as follows: (a) in paragraph 2, point (a) is replaced by the following: ‘(a) undertakings that are excluded from the scope of the group supervision under Article 214(2) of Directive 2009/138/EC;’; (b) paragraph 6 is replaced by the following: ‘6. Where the criteria referred to in Article 9(4) of this Regulation are satisfied, and where the use of the valuation methods referred to in points (a) and (b) of paragraph 1 is not possible, holdings in related undertakings may be valued based on the valuation method the insurance or reinsurance undertakings uses for preparing its annual or consolidated financial statements. In such cases, the participating undertaking shall deduct from the value of the related undertaking the value of goodwill and other intangible assets that would be valued at zero in accordance with Article 12(2) of this Regulation.’; (3) in Article 68, paragraph 3 is replaced by the following: ‘3. Notwithstanding paragraphs 1 and 2, insurance and reinsurance undertakings shall not deduct strategic participations as referred to in Article 171 which are included in the calculation of the group solvency on the basis of method 1 as set out in Annex I to Directive 2002/87/EC or on the basis of method 1 as set out in Article 230 of Directive 2009/138/EC.’; (4) in Title I, Chapter V, Section 5, the following Subsection 1a is inserted: ‘Subsection 1a Qualifying infrastructure investments Article 164a Qualifying infrastructure investments 1. For the purposes of this Regulation, qualifying infrastructure investment shall include investment in an infrastructure project entity that meets the following criteria: (a) the infrastructure project entity can meet its financial obligations under sustained stresses that are relevant for the risk of the project; (b) the cash flows that the infrastructure project entity generates for debt providers and equity investors are predictable; (c) the infrastructure assets and infrastructure project entity are governed by a contractual framework that provides debt providers and equity investors with a high degree of protection including the following: (a) where the revenues of the infrastructure project entity are not funded by payments from a large number of users, the contractual framework shall include provisions that effectively protect debt providers and equity investors against losses resulting from the termination of the project by the party which agrees to purchase the goods or services provided by the infrastructure project entity; (b) the infrastructure project entity has sufficient reserve funds or other financial arrangements to cover the contingency funding and working capital requirements of the project; Where investments are in bonds or loans, this contractual framework shall also include the following: (i) debt providers have security to the extent permitted by applicable law in all assets and contracts necessary to operate the project; (ii) equity is pledged to debt providers such that they are able to take control of the infrastructure project entity prior to default; (iii) the use of net operating cash flows after mandatory payments from the project for purposes other than servicing debt obligations is restricted; (iv) contractual restrictions on the ability of the infrastructure project entity to perform activities that may be detrimental to debt providers, including that new debt cannot be issued without the consent of existing debt providers; (d) where investments are in bonds or loans, the insurance or reinsurance undertaking can demonstrate to the supervisor that it is able to hold the investment to maturity; (e) where investments are in bonds for which a credit assessment by a nominated ECAI is not available, the investment instrument is senior to all other claims other than statutory claims and claims from derivatives counterparties; (f) where investments are in equities, or bonds or loans for which a credit assessment by a nominated ECAI is not available, the following criteria are met: (i) the infrastructure assets and infrastructure project entity are located in the EEA or in the OECD; (ii) where the infrastructure project entity is in the construction phase the following criteria shall be fulfilled by the equity investor, or where there is more than one equity investor, the following criteria shall be fulfilled by a group of equity investors as a whole: — the equity investors have a history of successfully overseeing infrastructure projects and the relevant expertise, — the equity investors have a low risk of default, or there is a low risk of material losses for the infrastructure project entity as a result of the their default, — the equity investors are incentivised to protect the interests of investors; (iii) the infrastructure project entity has established safeguards to ensure completion of the project according to the agreed specification, budget or completion date; (iv) where operating risks are material, they are properly managed; (v) the infrastructure project entity uses tested technology and design; (vi) the capital structure of the infrastructure project entity allows it to service its debt; (vii) the refinancing risk for the infrastructure project entity is low; (viii) the infrastructure project entity uses derivatives only for risk-mitigation purposes. 2. For the purposes of paragraph 1(b), the cash flows generated for debt providers and equity investors shall not be considered predictable unless all except an immaterial part of the revenues satisfies the following conditions: (a) one of the following criteria is met: (i) the revenues are availability-based; (ii) the revenues are subject to a rate-of-return regulation; (iii) the revenues are subject to a take-or-pay contract; (iv) the level of output or the usage and the price shall independently meet one of the following criteria: — it is regulated, — it is contractually fixed, — it is sufficiently predictable as a result of low demand risk; (b) where the revenues of the infrastructure project entity are not funded by payments from a large number of users, the party which agrees to purchase the goods or services provided by the infrastructure project entity shall be one of the following: (i) an entity listed in Article 180(2) of this Regulation; (ii) a regional government or local authority listed in the Regulation adopted pursuant to Article 109a(2)(a) of Directive 2009/138/EC; (iii) an entity with an ECAI rating with a credit quality step of at least 3; (iv) an entity that is replaceable without a significant change in the level and timing of revenues.’; (5) Article 168 is amended as follows: (a) paragraphs 1, 2 and 3 are replaced by the following: ‘1. The equity risk sub-module referred to in point (b) of the second subparagraph of Article 105(5) of Directive 2009/138/EC shall include a risk sub-module for type 1 equities, a risk sub-module for type 2 equities and a sub-risk module for qualifying infrastructure equities. 2. Type 1 equities shall comprise equities listed in regulated markets in countries which are members of the European Economic Area (EEA) or the Organisation for Economic Cooperation and Development (OECD), or traded on multilateral trading facilities, as referred to in Article 4(1)(22) of Directive 2014/65/EU, whose registered office or head office is in EU Member States. 3. Type 2 equities shall comprise equities other than those referred to in paragraph 2, commodities and other alternative investments. They shall also comprise all assets other than those covered in the interest rate risk sub-module, the property risk sub-module or the spread risk sub-module, including the assets and indirect exposures referred to in Article 84(1) and (2) where a look-through approach is not possible and the insurance or reinsurance undertaking does not make use of the provisions in Article 84(3).’; (b) the following paragraph 3a is inserted: ‘3a. Qualifying infrastructure equities shall comprise equity investments in infrastructure project entities that meet the criteria set out in Article 164a.’; (c) paragraph 4 is replaced by the following: ‘4. The capital requirement for equity risk shall be equal to the following: where: (a) SCR type1equities denotes the capital requirement for type 1 equities; (b) SCR type2equities denotes the capital requirement for type 2 equities; (c) SCR quinf denotes the capital requirement for qualifying infrastructure equities.’; (d) paragraph 6 is amended as follows: (i) points (a) and (b) are replaced by the following: ‘(a) equities, other than qualifying infrastructure equities, held within collective investment undertakings which are qualifying social entrepreneurship funds as referred to in Article 3(b) of Regulation (EU) No 346/2013 of the European Parliament and of the Council ( *1 ) where the look-through approach set out in Article 84 of this Regulation is possible for all exposures within the collective investment undertaking, or units or shares of those funds where the look through approach is not possible for all exposures within the collective investment undertaking; (b) equities, other than qualifying infrastructure equities, held within collective investment undertakings which are qualifying venture capital funds as referred to in Article 3(b) of Regulation (EU) No 345/2013 of the European Parliament and of the Council ( *2 ) where the look-through approach set out in Article 84 of this Regulation is possible for all exposures within the collective investment undertaking, or units or shares of those funds where the look through approach is not possible for all exposures within the collective investment undertaking; ( *1 ) Regulation (EU) No 346/2013 of the European Parliament and of the Council of 17 April 2013 on European social entrepreneurship funds ( OJ L 115, 25.4.2013, p. 18 )." ( *2 ) Regulation (EU) No 345/2013 of the European Parliament and of the Council of 17 April 2013 on European venture capital funds ( OJ L 115, 25.4.2013, p. 1 ).’;" (ii) in point (c), point (i) is replaced by the following: ‘(i) equities, other than qualifying infrastructure equities, held within such funds where the look-through approach set out in Article 84 of this Regulation is possible for all exposures within the alternative investment fund;’; (iii) the following point (d) is added: ‘(d) equities, other than qualifying infrastructure equities, held within collective investment undertakings which are authorised as European long-term investment funds pursuant to Regulation (EU) 2015/760 where the look through approach set out in Article 84 of this Regulation is possible for all exposures within the collective investment undertaking, or units or shares of those funds where the look through approach is not possible for all exposures within the collective investment undertaking.’; (6) in Article 169, the following paragraph 3 is added: ‘3. The capital requirement for qualifying infrastructure equities referred to in Article 168 of this Regulation shall be equal to the loss in the basic own funds that would result from the following instantaneous decreases: (a) an instantaneous decrease equal to 22 % in the value of qualifying infrastructure equity investments in related undertakings within the meaning of Article 212(1)(b) and 212(2) of Directive 2009/138/EC where these investments are of a strategic nature; (b) an instantaneous decrease equal to the sum of 30 % and 77 % of the symmetric adjustment as referred to in Article 172 of this Regulation in the value of qualifying infrastructure equities other than those referred to in point (a).’; (7) in Article 170, the following paragraph 3 is added: ‘3. Where an insurance or reinsurance undertaking has received supervisory approval to apply the provisions set out in Article 304 of Directive 2009/138/EC, the capital requirement for qualifying infrastructure equities shall be equal to the loss in the basic own funds that would result from an instantaneous decrease: (a) equal to 22 % in the value of the qualifying infrastructure equity corresponding to the business referred to in point (i) of Article 304(1) of Directive 2009/138/EC; (b) equal to 22 % in the value of qualifying infrastructure equity investments in related undertakings within the meaning of Article 212(1)(b) and (2) of Directive 2009/138/EC, where these investments are of a strategic nature; (c) equal to the sum of 30 % and 77 % of the symmetric adjustment as referred to in Article 172 of this Regulation in the value of qualifying infrastructure equities other than those referred to in points (a) or (b).’ (8) in Article 171, the introductory sentence is replaced by the following: ‘For the purposes of Article 169(1)(a), (2)(a) and (3)(a) and of Article 170(1)(b), (2)(b) and (3)(b), equity investments of a strategic nature shall mean equity investments for which the participating insurance or reinsurance undertaking demonstrates the following:’; (9) Article 173 is replaced by the following: ‘Article 173 Criteria for the use of transitional measure for standard equity risk 1. The transitional measure for standard equity risk set out in Article 308b(13) of Directive 2009/138/EC shall only apply to equities that were purchased on or before 1 January 2016 and which are not subject to the duration-based equity risk pursuant to Article 304 of that Directive. 2. Where equities are held within an collective investment undertaking or other investments packaged as funds, and where the look-through approach is not possible, the transitional measure set out in Article 308b(13) of Directive 2009/138/EC shall be applied to the proportion of equities held within the collective investment undertaking or investment packaged as funds in accordance with the target underlying asset allocation on 1 January 2016, provided the target allocation is available to the undertaking. The proportion of equities to which the transitional is applied shall be reduced annually in proportion to the asset turnover ratio of the collective investment undertaking or investment packaged as funds. Where the target allocation for equity investments of the collective investment undertaking or investment packaged as funds increases, the proportion of equities the transitional is applied to shall not increase.’; (10) in Article 180, the following paragraphs 11, 12 and 13 are added: ‘11. Exposures in the form of bonds and loans that fulfil the criteria set out in paragraph 12 shall be assigned a risk factor stress i depending on the credit quality step and the duration of the exposure according to the following table: Credit quality step 0 1 2 3 Duration ( dur i ) stress i a i b i a i b i a i b i a i b i up to 5 b i · dur i — 0,64 % — 0,78 % — 1,0 % — 1,67 % More than 5 and up to 10 a i + b i · ( dur i – 5) 3,2 % 0,36 % 3,9 % 0,43 % 5,0 % 0,5 % 8,35 % 1,0 % More than 10 and up to 15 a i + b i · ( dur i – 10) 5,0 % 0,36 % 6,05 % 0,36 % 7,5 % 0,36 % 13,35 % 0,67 % More than 15 and up to 20 a i + b i · ( dur i – 15) 6,8 % 0,36 % 7,85 % 0,36 % 9,3 % 0,36 % 16,7 % 0,67 % More than 20 min[ a i + b i · ( dur i – 20);1] 8,6 % 0,36 % 9,65 % 0,36 % 11,1 % 0,36 % 20,05 % 0,36 % 12. The criteria for exposures that are assigned a risk factor in accordance with paragraph 11 shall be: (a) the exposure relates to a qualifying infrastructure investment that meets the criteria set out in Article 164a; (b) the exposure is not an asset that fulfils the following conditions: — it is assigned to a matching adjustment portfolio in accordance with Article 77b(2) of Directive 2009/138/EC, — it has been assigned a credit quality step between 0 and 2; (c) a credit assessment by a nominated ECAI is available for the exposure; (d) the exposure has been assigned a credit quality step between 0 and 3. 13. Exposures in the form of bonds and loans that meet the criteria set out in paragraph 12(a) and (b), but do not meet the criteria set out in paragraph 12(c), shall be assigned a risk factor stress i equivalent to credit quality step 3 and the duration of the exposure in accordance with the table set out in paragraph 11.’; (11) The last sentence of Article 181(b) shall be replaced by the following: ‘For assets in the assigned portfolio for which no credit assessment by a nominated ECAI is available, and for qualifying infrastructure assets that have been assigned credit quality step 3, the reduction factor shall be 100 %.’ (12) the following Article 261a is inserted: ‘Article 261a Risk management for qualifying infrastructure investments 1. Insurance and reinsurance undertakings shall conduct adequate due diligence prior to making a qualifying infrastructure investment, including all of the following: (a) a documented assessment of how the project satisfies the criteria set out in Article 164a, which has been subject to a validation process, carried out by persons that are free from influence from those persons responsible for the assessment of the criteria, and have no potential conflicts of interest with those persons; (b) a confirmation that any financial model for the cash flows of the project has been subject to a validation process carried out by persons that are free from influence from those persons responsible for the development of the financial model, and have no potential conflicts of interest with those persons. 2. Insurance and reinsurance undertakings with a qualifying infrastructure investment shall regularly monitor and perform stress tests on the cash flows and collateral values supporting the infrastructure project entity. Any stress tests shall be commensurate with the nature, scale and complexity of the risk inherent in the infrastructure project. 3. Where insurance or reinsurance undertakings hold material qualifying infrastructure investments, they shall, when establishing the written procedures referred to in Article 41(3) of Directive 2009/138/EC, include provisions for an active monitoring of these investments during the construction phase, and for a maximisation of the amount recovered from these investments in case of a work-out scenario. 4. Insurance or reinsurance undertakings with a qualifying infrastructure investment in bonds or loans shall set up their asset-liability management to ensure that, on an ongoing basis, they are able to hold the investment to maturity.’; (13) in Article 316, paragraph 2 is replaced by the following: ‘2. As of 31 December 2020, the disclosure shall include data of the four previous years. In relation to disclosure before 31 December 2020, it shall include data of all previous years starting from 1 January 2016.’.