Prudential Regulation Authority Rulebook

9.1

Own funds eligible for the SCR must not be taken into account more than once among the different Solvency II undertakings taken into account in the calculation of the solvency of a group. For that purpose, when calculating the solvency of a group and where method 1 and method 2 do not provide for it, the following amounts must be excluded:

1. (1) the value of any asset of the participating Solvency II undertaking which represents the financing of own funds eligible for the SCR of one of its related Solvency II undertakings;
2. (2) the value of any asset of a related Solvency II undertaking of the participating Solvency II undertaking which represents the financing of own funds eligible for the SCR of that participating Solvency II undertaking; and
3. (3) the value of any asset of a related Solvency II undertaking of the participating Solvency II undertaking which represents the financing of own funds eligible for the SCR of any other related Solvency II undertaking of that participating Solvency II undertaking.

9.2

Without prejudice to 9.1 or 9.3, the following must be excluded in the calculation of the solvency of a group unless they are, and only insofar as they are, eligible for covering the SCR of the related undertaking concerned:

1. (1) surplus funds falling under Surplus Funds 2.2 or Solvency II EEA implementing measures implementing Article 91(2) of the Solvency II Directive arising in a related Solvency II undertaking of the participating Solvency II undertaking for which the solvency of a group is calculated; and
2. (2) any subscribed but not paid-up capital of a related Solvency II undertaking of the participating Solvency II undertaking for which the solvency of a group is calculated.

[Note: Art. 222(2) of the Solvency II Directive]

9.3

Without prejudice to 9.1, the following must, in any event, be excluded from the calculation:

1. (1) subscribed but not paid-up capital which represents a potential obligation on the part of the participating undertaking;
2. (2) subscribed but not paid-up capital of the participating Solvency II undertaking which represents a potential obligation on the part of a related Solvency II undertaking; and
3. (3) subscribed but not paid-up capital of a related Solvency II undertaking which represents a potential obligation on the part of another related Solvency II undertaking of the same participating Solvency II undertaking.

9.4

Where the PRA considers that certain own funds eligible for the SCR of a related Solvency II undertaking (other than those referred to in 9.2 and 9.3) cannot effectively be made available to cover the SCR of the participating Solvency II undertaking for which the solvency of a group is calculated, those own funds must not be included in the calculation of the group solvency of the group unless they are, and only in so far as they are, eligible for covering the SCR of the related undertaking.

[Note: Art. 222(3) of the Solvency II Directive]

9.5

The sum of the own funds included under 9.2 and 9.4 must not exceed the SCR of the related Solvency II undertaking.

[Note: Art. 222(4) of the Solvency II Directive]

9.6

Any eligible own funds of a related Solvency II undertaking of the participating Solvency II undertaking for which the solvency of a group is calculated that are subject to prior authorisation from the supervisory authority of the related Solvency II undertaking, in accordance with regulation 44 of the Solvency 2 Regulations or Solvency II EEA implementing measures implementing Article 90 of the Solvency II Directive, must be included in the calculation of the group solvency only in so far as they have been duly authorised by that supervisory authority.

[Note: Art. 222(5) of the Solvency II Directive]

9.7

When calculating the solvency of a group, no account must be taken of any own funds eligible for the SCR arising out of reciprocal financing between the participating Solvency II undertaking and any of the following:

1. (1) a related undertaking;
2. (2) a participating undertaking; and
3. (3) another related undertaking of any of its participating undertakings.

[Note: Art. 223(1) of the Solvency II Directive]

9.8

When calculating the solvency of a group, no account must be taken of any own funds eligible for the SCR of a related Solvency II undertaking of the participating Solvency II undertaking for which the group solvency of the group is calculated where the own funds concerned arise out of reciprocal financing with any other related undertaking of that participating Solvency II undertaking. Reciprocal financing exists at least where a Solvency II undertaking, or any of its related undertakings, holds shares in, or makes loans to, another undertaking which, directly or indirectly, holds eligible own funds of the first undertaking.

[Note: Art. 223(2), (3) of the Solvency II Directive]

9.9

The value of the assets and liabilities of a group must be assessed in accordance with Valuation 2.

[Note: Art. 224 of the Solvency II Directive]