Order on Business Plans, Recovery Plans, Financing Plans and Individual Solvency Requirements for Insurance Undertakings

Order on Business Plans, Recovery Plans, Financing Plans and Individual Solvency Requirements for Insurance Undertakings1)

Pursuant to Section 20, paragraph 2, Section 162, item 2, Section 223, paragraph 5, Section 224, paragraph 3, Section 225, paragraph 2, and Section 316, paragraph 1, of Act No. 718 of 13 June 2023 on Insurance Undertakings, it is hereby prescribed:

Chapter 1
Scope of Application

Section 1. This Order applies to Group 1 and Group 2 insurance undertakings.

Chapter 2
Business Plans

Section 2. A business plan prepared as part of the application for permission to conduct insurance business, cf. Section 20 of the Act on Insurance Undertakings, must cover the insurance undertaking's first three financial years and be divided into quarters.

Paragraph 2. If the undertaking's first financial report covers a period of less than one year, the business plan must cover this period and the three subsequent financial years.

Section 3. The business plan must include the following:

1. The insurance undertaking's business model.
2. Information on the nature of the risks or liabilities that the insurance undertaking intends to assume.
3. Information on the insurance undertaking's corporate governance.
4. An opening balance sheet as it is expected to be after the deduction of establishment costs.
5. The expected accounting results in the form of income statements and balance sheets for the financial years covered by the business plan.
6. A statement on the insurance undertaking's investment policy.
7. A statement on the intended reinsurance programmes and creditworthiness.
8. The estimated costs for setting up the insurance undertaking's administration during the period covered by the business plan.
9. The estimated administrative costs excluding costs related to the setup of the administration, in particular the ongoing general costs and commissions.

Paragraph 2. Insurance undertakings conducting business covered by Annex 1 to the Act on Insurance Undertakings must, in their business plan, in addition to the information mentioned in paragraph 1, include the following:

1. The estimated premiums, including the undertaking's expectations regarding premiums for own account in relation to claims expenses for own account.
2. The estimated premiums or contributions and loss expenses.
3. Information on the equipment that the undertaking has available for use in business covered by insurance class 18.

Paragraph 3. Insurance undertakings conducting business covered by Annex 2 to the Act on Insurance Undertakings must, in their business plan, in addition to the information mentioned in paragraph 1, include the following:

1. A detailed overview of the expected revenues and expenses related to direct insurance business as well as the assumption and cession of reinsurance.
2. The technical basis on which the business plan is based.

Section 4. A Group 1 insurance undertaking must, in its business plan, in addition to the information mentioned in Section 3, include the following:

1. An estimate of the future solvency capital requirement, cf. Section 154 of the Act on Insurance Undertakings, based on the expected balance sheet, information on the method used to calculate these estimates, and an overview of the undertaking's capital base, cf. Section 153 of the Act on Insurance Undertakings, to cover the solvency capital requirement.
2. An estimate of the future minimum capital requirement, cf. Section 155 of the Act on Insurance Undertakings, based on the expected balance sheet, information on the method used to calculate these estimates, and an overview of the undertaking's basic capital base, cf. Section 153, paragraph 2, of the Act on Insurance Undertakings, to cover the absolute minimum for the minimum capital requirement, cf. Section 155, paragraph 5, of the Act on Insurance Undertakings.
3. An estimate of the financial resources allocated to cover the insurance technical provisions, the solvency capital requirement, and the minimum capital requirement.
4. An assessment of the risk that the insurance undertaking will not be able to meet the solvency capital requirement or the minimum capital requirement within the first year.
5. An assessment of the risk that the insurance undertaking will lose its entire capital base within the first year.

Section 5. A Group 2 insurance undertaking must, in its business plan, in addition to the information mentioned in Section 3, include the following:

1. An estimate of the individual solvency requirement, cf. Section 16, and an overview of the undertaking's basic capital, cf. Section 157, of the Act on Insurance Undertakings.
2. An assessment of the risk that the insurance undertaking will not be able to meet the minimum basic capital, cf. Section 156, paragraphs 2 and 3, of the Act on Insurance Undertakings, and the individual solvency requirement, cf. Section 156, paragraph 4, of the Act on Insurance Undertakings, within the first year.
3. An assessment of the risk that the insurance undertaking will lose its entire basic capital within the first year.

Section 6. The Danish Financial Supervisory Authority may require the insurance undertaking, in addition to the information mentioned in Sections 3-5, to provide other information deemed necessary to assess whether the results of the business plan can be considered realistic.

Section 7. Permission to conduct insurance business shall not be issued for Group 1 insurance undertakings if the Danish Financial Supervisory Authority, based on the submitted information, cf. Sections 3-6, finds it unlikely that the undertaking, during the period covered by the business plan and upon its expiry, will be able to meet the minimum capital requirement and the solvency capital requirement pursuant to Sections 154 and 155 of the Act on Insurance Undertakings.

Paragraph 2. Permission to conduct insurance business shall not be issued for Group 2 insurance undertakings if the Danish Financial Supervisory Authority, based on the submitted information, finds it unlikely that the undertaking, during the period covered by the business plan and upon its expiry, will be able to meet the requirements for the size of the basic capital pursuant to Section 156 of the Act on Insurance Undertakings.

Section 8. If permission to conduct insurance business is issued, the insurance undertaking's quarterly financial reports, cf. Section 2, paragraph 1 or 2, must be submitted to the Danish Financial Supervisory Authority in a format that allows the undertaking's actual results to be compared with the expected results contained in the business plan.

Section 9. The Danish Financial Supervisory Authority may decide that the business plan must be revised, or that a new business plan must be prepared for the following three financial years from the decision, if there is a deterioration in the insurance undertaking's financial position compared to the expectations in the original business plan.

Section 10. The provisions in Sections 2-10 apply mutatis mutandis when an insurance undertaking applies for an extension of an existing permission, insofar as the undertaking's circumstances, combined with the desired extension of the permission, are deemed necessary by the Danish Financial Supervisory Authority.

Chapter 3
Recovery Plans and Financing Plans

Section 11. A recovery plan, cf. Sections 223 and 225 of the Act on Insurance Undertakings, must as a minimum contain information or documentation regarding:

1. The insurance undertaking's estimated administrative costs, in particular the ongoing general costs and commissions.
2. Information on the expected revenues and expenses related to direct insurance business as well as the assumption and cession of reinsurance.
3. Expected accounting and solvency balance sheets.
4. The intended investment policy.
5. A statement on the intended reinsurance programmes and creditworthiness.

Paragraph 2. For Group 1 insurance undertakings, the recovery plan must, in addition to the information mentioned in paragraph 1, contain an estimate of the financial resources allocated to cover the insurance technical provisions, the capital base, the solvency capital requirement, and the minimum capital requirement.

Paragraph 3. For Group 2 insurance undertakings, the recovery plan must, in addition to the information mentioned in paragraph 1, contain an estimate of the size of the individual solvency requirement and the basic capital.

Section 12. A Group 1 insurance undertaking's financing plan, cf. Section 224 of the Act on Insurance Undertakings, must as a minimum contain the information mentioned in Section 11, paragraphs 1 and 2.

Section 13. A Group 1 insurance undertaking that has prepared a recovery plan or a financing plan will not receive permission to transfer its insurance portfolio pursuant to Section 3, paragraph 1, of the Order on the Transfer of Insurance Portfolios of Group 1 Insurance Undertakings, where the insurance contracts were concluded in accordance with the rules on freedom of establishment or in accordance with the rules on freedom to provide services, as long as the Danish Financial Supervisory Authority assesses that policyholders' rights are at risk.

Chapter 4
Solvency of Group 2 Insurance Undertakings

Section 14. A Group 2 insurance undertaking must at all times possess a basic capital that corresponds at least to the highest value of the individual solvency requirement, cf. Section 16, and the requirement for minimum basic capital, cf. Section 156, paragraphs 2 and 3, of the Act on Insurance Undertakings.

Risk Assessment

Section 15. The board of directors of a Group 2 insurance undertaking must conduct an assessment of all significant risks that the undertaking is or may be exposed to during its strategic planning period at least once a year. Regardless of the first sentence, the undertaking must conduct a new risk assessment immediately after significant changes are made to the undertaking's strategy, business model, risk profile, or risk tolerance limits.

Paragraph 2. The risk assessment must be based on the undertaking's business model, risk profile, and risk tolerance limits and must as a minimum include the following:

1. A qualitative description of the insurance undertaking's most significant risks.
2. An assessment of which risks are covered by capital and which risks are covered by risk-mitigating measures, such as business processes, internal controls, or similar.
3. A quantification of the insurance undertaking's most significant risks.

Paragraph 3. The risk assessment must be submitted to the Danish Financial Supervisory Authority no later than two weeks after the board's approval.

Individual Solvency Requirement

Section 16. A Group 2 insurance undertaking must calculate the undertaking's individual solvency requirement, cf. Section 156, paragraph 4, of the Act on Insurance Undertakings.

Paragraph 2. The solvency requirement is calculated as the amount necessary for the undertaking to cover the risk, as calculated according to the risk assessment pursuant to Section 15, on existing business as well as new business expected to be written within the following 12 months. The risk must be calculated with a protection level corresponding to Value-At-Risk with a confidence level of 99.5 percent and a time horizon of 12 months.

Paragraph 3. The Group 2 insurance undertaking must calculate the individual solvency requirement as of 31 December and report the result to the Danish Financial Supervisory Authority no later than 20 working days thereafter. The undertaking must conduct a new calculation in the event of changes of significant importance to the calculated individual solvency requirement and report the result to the Danish Financial Supervisory Authority no later than 20 working days thereafter.

Chapter 5
Penal Provisions

Section 17. Violation of Sections 8, 11, 12, 14, and 15, as well as Section 16, paragraph 3, is punishable by a fine.

Paragraph 2. Undertakings and other legal persons may be subject to criminal liability pursuant to the rules in Chapter 5 of the Criminal Code.

Chapter 6
Entry into Force

Section 18. This Order enters into force on 1 January 2025.

Paragraph 2. Order No. 356 of 8 April 2015 on business plans, recovery plans, financing plans, and individual solvency requirements for insurance undertakings is repealed.

Danish Financial Supervisory Authority, 5 December 2024 Louise Mogensen / Line Bergmann

1. The Order contains provisions implementing parts of 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), OJ EU 2009, No. L 335, p. 1, as amended by Directive 2014/51/EU of the European Parliament and of the Council of 16 April 2014 amending Directives 2003/71/EC and 2009/138/EC and Regulations (EC) No 1060/2009, (EU) No 1094/2010 and (EU) No 1095/2010 as regards the powers conferred on the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority), OJ EU 2014, No. L 153, p. 1.

Act Series A
2024 Published on 11 December 2024
5 December 2024. No. 1480.
Ministry of Business Affairs,
Danish Financial Supervisory Authority, file no. 24-019422 CQ003068