Solvency II: Subordinated Tier 1, Tier 2 and Tier 3 instruments

Q&A

Read aloud

Question:

In accordance with Article 88 of the Solvency II Directive, insurance companies are allowed under certain conditions to include paid-in subordinated liabilities in their actual own funds. Are insurance companies required to submit these subordinated loans to the supervisory authority for assessment beforehand?

Published: 02 February 2016

Answer:

No, there is no need for institutions to have the supervisory authority assess these subordinated liabilities beforehand, in order for them to be designated as Tier 1, Tier 2 or Tier 3 capital. Instruments may be assessed retrospectively, however. The supervisor may, however, conclude in retrospect that an institution has incorrectly designated an instrument as own funds, and may order it to remove the instrument from its own funds. The conditions that must be met are included in Article 71 (for Tier 1), Article 73 (for Tier 2) and Article 77 (for Tier 3) of the Commission Delegated Regulation (EU) 2015/35 and the EIOPA guidelines governing the classification of own funds ( EIOPA-BoS-14/168 ). Additional stipulations apply to insurance groups, including those contained in Articles 330, 331 and 333 of the Delegated Regulation.

Insurers may present an intended share issue to the supervisory authority in order to determine whether the instrument qualifies as envisaged core capital. DNB encourages institutions to do this, in order to prevent surprises.

We want to emphasise that a preliminary assessment does not automatically result in formal approval from the supervisory authority, however. The latter will only inform the institution that the instrument has been assessed, and - in case of a positive assessment - that there is no reason at that point to assume the instrument would not qualify as AT1 or T2 capital. The instrument may still be disqualified in retrospect, however.

If institutions opt to discuss planned share issues with the supervisory authority beforehand, they will be asked to perform a self-assessment and to present documentation, allowing the supervisor to assess whether the instrument qualifies as Tier 1, Tier 2 or Tier 3 capital. The self-assessment framework can be downloaded from this page. The framework also lists the documents to be provided, which include a description showing that the instrument fits the institution's capital management and capital policy.

We would advise you to notify your supervisory officer at an early stage of your plans for submitting a request for assessment. The usual turnaround time for assessment is four weeks, depending on the complexity of the request.

Downloads

Own Funds Self Assesment SII

Gedelegeerde Verordening (EU) 2015/35
(Refers to an external site)

Guidelines on Classification of Own Funds
(Refers to an external site)

Base law

Solvency II Directive
(Refers to an external site)

Delegated Solvency II
(Refers to an external site)

EIOPA guidelines on the classification of own funds (Refers to an external site)

Discover related articles

Q&A

Capital

Capital requirements

Insurers

Share:

Share on LinkedIn

Share on X

Share on Facebook

Share via Email

Interesting articles

Dutch insurers and pension funds have been investing more in private assets in recent years

15 July 2026

News item supervision

Dutch insurers and pension funds are investing more and more in private assets, such as private equity and private credit. By 2025, they had a combined total of €276 billion worth of these investments on their books.

Read more
Dutch insurers and pension funds have been investing more in private assets in recent years

News item supervision

15 July 2026

De Nederlandsche Bank publishes ‘Integrity Supervision in Focus 2026’

25 June 2026

News item supervision

In the third edition of ‘Integrity Supervision in Focus’ (ISF), we share the key insights from our integrity supervision.

Read more
De Nederlandsche Bank publishes ‘Integrity Supervision in Focus 2026’

News item supervision

25 June 2026

DNB email on technical adjustments

25 June 2026

News item supervision

This week, you may receive an email from De Nederlandsche Bank (DNB). This email concerns technical adjustments required to continue corresponding with DNB by email.

Read more
DNB email on technical adjustments

News item supervision

25 June 2026

Update FATF-warning lists June 2026

23 June 2026

News item supervision

FATF released an update of its ‘grey’ and ‘black’ lists.

Read more
Update FATF-warning lists June 2026

News item supervision

23 June 2026

Necessary cookies

To ensure the proper operation of the website, De Nederlandsche Bank (DNB) uses functional cookies and analytics cookies, and has taken measures to ensure that these cookies have little or no impact on the privacy of website users.

Optional cookies

Some pages include embedded content from external websites. These websites may use proprietary (tracking) cookies. This allows third parties to track visitor statistics, show personalised content and display targeted ads, for example.

You can make your choice about allowing these optional cookies both when you first visit the website and when you navigate to a page with embedded content.