European Business Law, the fourth volume in our series, shows how the European authorities simultaneously abolish all restrictions on access to and exercise of economic activities and support the growth of domestic markets, through the harmonization the internal legislation or the enactment of genuinely unified regulations.

European Business Law

In part the objective of Directive No 2009/138 is to strengthen and rationalize the way in which insurance and reinsurance groups are supervised. Although the supervision of individual insurance and reinsurance undertakings remains the essential principle of insurance supervision it is necessary to determine which undertakings fall under the scope of supervision at group level to have a better gra …

Group supervision

In part the objective of Directive No 2009/138 is to strengthen and rationalize the way in which insurance and reinsurance groups are supervised. Although the supervision of individual insurance and reinsurance undertakings remains the essential principle of insurance supervision it is necessary to determine which undertakings fall under the scope of supervision at group level to have a better grasp of the financial situation of the insurance or reinsurance undertaking. To make supervision as effective and as broad as possible, the concept of “group” is defined as a concentration of undertakings united not only through capital ties but through formalized strong and sustainable financial relationships based on contractual or other material recognition that guarantees a financial solidarity between those undertakings provided that one of those undertakings effectively exercises, through centralized coordination, a dominant influence over the decisions, including financial decisions, of the other undertakings that are part of the group (Art. 212). Group supervision is not intended to replace the individual supervision of the undertakings it comprises (Art. 213). Furthermore, Article 214(2) of the directive provides that an undertaking may be not included in the group supervision where is it of negligible interest with respect to the objectives of group supervision or where its inclusion would be inappropriate or misleading with respect to those objectives.

In order to limit the burden represented by group supervision, the directive provides that in principle it only applies at the level of the ultimate parent undertaking which has its head office in the EU. Member States can nevertheless authorize their supervisory authorities to apply group supervision at a limited number of lower levels, where they deem it necessary (Art. 215 to 217). The group must at all times have sufficient own funds to cover its group solvency capital requirements calculated according to the formula set out in Articles 220 to 234. In order to ensure compliance with those provisions, the directive has established the function of “group supervisor”, which is defined as a single supervisor, designated from among the supervisory authorities of the Member States concerned and entrusted with decision-making powers and responsible for coordination (Art. 247). The group supervisor coordinates the gathering and dissemination of relevant or essential information for going concern and emergency situations, including the dissemination of information which is of importance for the supervisory task of a supervisory authority; ensures prudential control and assesses the financial situation of the group; assesses compliance of the group with the rules on solvency and of risk concentration and intra-group transactions; assesses the system of governance of the group and plans and coordinates supervisory activities in going-concern as well as in emergency situations, in cooperation with the supervisory authorities concerned and taking into account the nature, scale and complexity of the risks inherent in the business of all undertakings that are part of the group (Art. 248).

For the method of calculation of the group's solvency, the directive uses the accounting consolidation-based method as its default method (Art. 230) . Groups can also be authorized to use an internal model (Art. 231). A third (alternative) method based on deduction and aggregation is also provided under Article 233 of the directive. 

The aim of the directive proposal was to institute a regime designed to facilitate the management of own funds by groups, allowing under certain conditions a parent undertaking to use declarations of “group support” to meet part of the SCR of its subsidiaries and introducing limited derogations to some rules on solo supervision. In the end, this proposal was not retained by the Parliament and the Council. However, recitals 140 and 141 of Directive No 2009/138 provide that the legislation should be revised further and specifically refer to that objective.

The calculation of the group solvency of the participating insurance or reinsurance undertaking is carried out on the basis of the consolidated accounts.

European Business Law

139. Group supervision

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise

Les notions juridiques connexes

139. Group supervision

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les notions juridiques connexes

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise