Prudential Regulation Authority Rulebook

8A.1

Where an own funds item has been classified into one of the three tiers based on the criteria set out in Own Funds 3A – 3J by a related Solvency II undertaking that is included in the calculation of the group solvency, the own funds item shall be classified in the same tier at group level provided that all of the following additional requirements are met:

1. (1) the Solvency II undertaking complies with the requirements set out in Own Funds 3B.1 – 3B.13, 3E.1 – 3E.5 and 3G.1 – 3G.5; and
2. (2) the own funds item is free from encumbrances and is not connected with any other transaction, which when considered with the own funds item, could result in that own funds item not satisfying the requirements set out in Own Funds 3.1 to 3.3 at group level.

8A.2

For the purposes of point (1) of 8A.1:

1. (1) the term ‘SCR’ in Own Funds 3B.1 – 3B.13, 3E.1 – 3E.5 and 3G.1 – 3G.5 shall mean both the SCR of the related undertaking that has issued the own funds item and the group SCR;
2. (2) the term ‘MCR’ in Own Funds 3B.1 – 3B.13, 3E.1 – 3E.5 and 3G.1 – 3G.5 shall mean both the MCR of the undertaking that has issued the own funds item and one of the following minimums:
   1. (a) where method 1 is used, the minimum for the group SCR as calculated in accordance with 11.3(2), or
   2. (b) where a combination of method 1 and method 2 is used, the minimum determined in accordance with 10.7.

8A.3

For the purposes of this Chapter, references to ‘firm’ in Own Funds 3A – 3J in the context of the characteristics and features of an own funds item shall mean both the participating Solvency II undertakings and the Solvency II undertakings belonging to the group that has issued the own funds item.

8A.4

Notwithstanding 8A.1, where a related Solvency II undertaking has included in Tier 2 own funds an own funds item which would qualify for inclusion in Tier 1 own funds in accordance with Own Funds 3E.1(11), that classification shall not prohibit the classification of the same own funds item in Tier 1 own funds at group level, provided that the limits set out in Own Funds 4A.3 are complied with at group level.