GFSC Guidance Note on Insurance Group Supervision

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GFSC Guidance Note
The GFSC’s Approach to Insurance Group
Supervision
1 Month 2017
Version: 1
Publication Date: 14 August 2025

Gibraltar Financial Services Commission Guidance Note on the GFSC’s Approach to Insurance Group Supervision 2 Contents

1. Introduction........................................................................................................... 3
2. Cases of application and scope ................................................................................. 4
   Financial conglomerates................................................................................................... 4
3. Group solvency calculation and group eligible own funds ............................................. 4
   Supervision of group solvency and frequency of calculation........................................... 4
   Choice of method: general principles............................................................................... 5
   Inclusion of proportional share ........................................................................................ 6
   Ancillary own funds for an intermediate insurance holding company ............................ 6
   Availability at group level of the eligible own funds of related undertakings ................. 7
4. Third countries....................................................................................................... 8
   Participating undertakings: Calculation of group solvency .............................................. 8
   Inclusion of a third-country insurance or reinsurance undertaking under Method 2 ..... 8
   Parent undertaking outside Gibraltar: absence of equivalence....................................... 9
   Parent undertakings outside Gibraltar: levels.................................................................. 9
5. Temporary use of more than one calculation approach ................................................ 9
6. Risk concentration and intra-group transactions........................................................ 11
   Supervision of risk concentration and intra-group transactions.................................... 11
   Intra-group transactions in groups headed by mixed-activity insurance holding
   companies....................................................................................................................... 12
   Conditions under which the GFSC may not supervise risk concentrations or intra-group
   transactions. ................................................................................................................... 12
7. Scope of group supervision .................................................................................... 13

Gibraltar Financial Services Commission Guidance Note on the GFSC’s Approach to Insurance Group Supervision 3

1. Introduction
   1.1. This Guidance Note sets out the GFSC’s approach to certain aspects of insurance group
   supervision under Part 11 of the Insurance Companies Regulations1 and Part 2 of the Solvency 2 Technical Standards2 . It is relevant to insurance and reinsurance undertakings, insurance holding companies and mixed financial holding companies within the scope of those regulations.
   1.2. This Guidance Note sets out the following information.
   a) Chapter 2 explains the cases of application and scope of group supervision. It also explains the GFSC’s approach to insurance groups where the group is a financial conglomerate. b) Chapter 3 explains the GFSC’s approach to exercising its powers in relation to how insurance groups calculate their group solvency capital requirement (SCR) and group eligible own funds. c) Chapter 4 explains the GFSC’s approach to third countries and the GFSC’s policy when exercising discretion to allow a group that meets certain factors to include the SCR and eligible funds of a participating undertaking in a third-country insurance or reinsurance undertaking in the calculation of group solvency under Method 2 (deduction and aggregation method), where that third-country undertaking is subject to authorisation and a solvency regime which is determined to be equivalent to that set out in Part 6 of the Insurance Companies Regulations. d) Chapter 5 explains the GFSC’s policy when permitting groups, which meet certain factors, to add the results of two or more calculation approaches while calculating the consolidated group SCR as an interim option until the new or extended group internal model (or group￾specific parameters) has been permitted. e) Chapter 6 explains the GFSC’s policy to identify and monitor risk concentration and intragroup transactions including in the case of mixed-activity insurance holding companies.
   1.3. This Guidance Note should be read in conjunction with the ‘Group Supervision’ Part of the
   Insurance Companies Regulations and the ‘Insurance Groups’ Part of the Solvency 2 Technical Standards, as well as the following GFSC Guidance Notes:
   a) Solvency 2: Capital add-ons; and b) Solvency 2: Group Supervision.
   1 Financial Services (Insurance Companies) Regulations 2020 2 Financial Services (Solvency 2)(Technical Standards) Regulations 2025

Gibraltar Financial Services Commission Guidance Note on the GFSC’s Approach to Insurance Group Supervision 4
2. Cases of application and scope
Financial conglomerates
2.1. Where a mixed financial holding company is subject to equivalent provisions under:
f) the Insurance Companies Regulations and the Financial Conglomerates Regulations, in particular in terms of risk-based supervision, the GFSC may apply only the relevant provisions of the Financial Conglomerates Regulations to that mixed financial holding company; and g) the Insurance Companies Regulations and the Financial Services (Credit Institutions and Capital Requirements) Regulations 2020, in particular in terms of risk based supervision, the GFSC may apply only the provisions of whichever set of those Regulations relates to the most significant sector, determined in accordance with regulation 3(2) of the Financial Conglomerates Regulations.
3. Group solvency calculation and group eligible own funds
Supervision of group solvency and frequency of calculation
3.1. In relation to supervision of group solvency and frequency of calculation, where the GFSC is the
group supervisor of a group within the scope of regulation 192(3) of the Insurance Companies Regulations, the GFSC will:
a) subject to regulation 225A of the Insurance Companies Regulations, ensure that the calculations referred to in regulations 197(2) and (3) of those Regulations are carried out at least annually by the participating insurance or reinsurance undertaking, the insurance holding company or the mixed financial holding company to ensure that the group has adequate financial resources at the level of the ultimate insurance or reinsurance undertaking, insurance holding company, or mixed financial holding company in the group; b) conduct supervisory reviews to determine whether the insurance or reinsurance undertakings in the group are complying with the requirement to ensure that the group has adequate financial resources at the level of the ultimate insurance or reinsurance undertaking, insurance holding company, or mixed financial holding company in the group; and c) where the group is not headed by an insurance or reinsurance undertaking, consult the undertakings in the group before identifying an undertaking other than an insurance holding company or a mixed financial holding company to supply relevant data for, and the results of, the calculations referred to in paragraph 3.1(a).

Gibraltar Financial Services Commission Guidance Note on the GFSC’s Approach to Insurance Group Supervision 5 Choice of method: general principles
3.2. Where the GFSC is considering whether to exercise its statutory power under regulation 199(3)
of the Insurance Companies Regulations, it will, in consultation with the participating insurance or reinsurance undertaking or the insurance holding company or the mixed financial holding company, consider all of the following elements when assessing whether the exclusive application of Method 1 is not appropriate:
a) whether the amount and quality of information available in relation to a related undertaking would not be sufficient for it to be subject to Method 1; b) whether a related undertaking is not covered by a group internal model, in the cases where the GFSC has given permission under regulation 210 of the Insurance Companies Regulations in accordance with regulation 276A of those Regulations providing for a group internal model to be used for the calculation of the consolidated group SCR; c) whether, for the purposes of paragraph 3.2(b), the risks that are not captured in the group internal model are immaterial in relation to the overall risk profile of the group; d) whether the nature, scale, and complexity of the risks of the group are such that the use of Method 2 in relation to that related undertaking or those related undertakings does not materially affect the results of the group solvency calculation; e) whether intra-group transactions are not significant both in terms of volume and value of the transaction; f) where the group includes related third country insurance or reinsurance undertakings, whether the solvency regimes of those third countries are equivalent in accordance with Regulation 238 of the Insurance Companies Regulations and Part 3 of the Solvency 2 Technical Standards; and g) whether the use of Method 1 in relation to a related undertaking or several related undertakings would be overly burdensome.
3.3. As part of the assessment in paragraph 3.2, the GFSC will review the impact of the use of Method
2 or a combination of methods on the solvency position of the group, own funds availability, and the interconnectedness of any entity for which Method 2 would be used and the rest of the group.
3.4. For the purposes of the materiality assessment set out in paragraph 3.2(d), Method 2 should be
compared with Method 1 using the aggregated group eligible own funds and the aggregated group SCR calculated in accordance with the relevant provisions of the Insurance Companies Regulations and the Solvency 2 Technical Standards.

Gibraltar Financial Services Commission Guidance Note on the GFSC’s Approach to Insurance Group Supervision 6
3.5. The GFSC expects firms to apply the method or combination of methods chosen in a consistent
manner over time. The GFSC may decide to revoke or vary a direction that it has granted and require the participating undertaking or the insurance holding company or the mixed financial holding company to revert to Method 1 in relation to any related undertaking where the use of Method 2 or a combination of Methods 1 and 2 is not appropriate after considering the elements referred to in paragraph 3.2 for the specific circumstances of the group. Inclusion of proportional share
3.6. Where regulation 200(3) of the Insurance Companies Regulations applies, the GFSC may allow
for the solvency deficit of the subsidiary undertaking to be taken into account on a proportional basis, in accordance with regulation 200(4) of the Insurance Companies Regulations. .
3.7. Regulation 200(5) of the Insurance Companies Regulations applies if there are no capital ties
between any of the undertakings in the group, if a participating undertaking has a participation in another undertaking because it effectively exercises a significant influence over that undertaking, or if a participating undertaking is a parent undertaking of another undertaking because it effectively exercises a dominant influence over that undertaking. The GFSC may set a proportional share lower than 100% to be taken into account in the calculation of group solvency.
3.8. Before determining the proportional share, the GFSC will consult the undertakings in the group.
Ancillary own funds for an intermediate insurance holding company
3.9. Where the GFSC is the group supervisor of a group that includes an intermediate insurance
holding company or an intermediate mixed financial holding company, an insurance or reinsurance undertaking may apply to the GFSC for approval to include the intermediate insurance holding companies’ ancillary own funds in the calculation of group solvency. In determining whether or not to grant this modification, the GFSC would be exercising its power under regulation 205(4) of the Insurance Companies Regulations, in accordance with regulation 276A of those regulations, and follow the ancillary own funds approvals process set out in the GFSC’s Guidance Note on ‘Solvency 2: Own funds approvals’3 .
3.10. In deciding whether ancillary own funds can be included in the calculation of group
solvency, the GFSC will take into account:
a) the status of the counterparties concerned, in relation to their ability and willingness to pay; b) the recoverability of the funds, taking account of the legal form of the ancillary own fund item and any conditions which would prevent the item from being successfully paid in or called up; and 3 GFSC Guidance Note on Solvency 2: Own funds approvals

Gibraltar Financial Services Commission Guidance Note on the GFSC’s Approach to Insurance Group Supervision 7 c) any information on the outcome of past calls that intermediate insurance holding companies and intermediate mixed financial holding companies have made for each ancillary own-fund item, to the extent that information can be reliably used to assess the expected outcome of future calls.
3.11. The GFSC will approve a monetary amount for each ancillary own-fund item, or a method
by which each ancillary own-fund item may be determined for a specified period of time. Availability at group level of the eligible own funds of related undertakings
3.12. The items listed in Article 330(3) and (4) of the Solvency 2 Technical Standards are
provided not to be effectively available to cover the group SCR. However, any eligible own funds of a related insurance or reinsurance undertaking of the participating insurance or reinsurance undertaking for which the group solvency is calculated that are subject to prior authorisation from the GFSC in accordance with regulation 84 of the Insurance Companies Regulations may be included in the calculation only in so far as they have been so authorised. In other words, ancillary own funds may be deemed effectively available to cover the group SCR in these circumstances. This is most likely to be the case where own funds items assumed not to be available are shown to be available in the specific circumstances of the group to cover the group SCR.
3.13. In assessing whether certain own funds eligible to cover the SCR of a related insurance or
reinsurance undertaking, a third country insurance or reinsurance undertaking, an insurance holding company or a mixed financial holding company cannot effectively be made available to cover the group SCR, the GFSC’s assessment will take into account the following factors:
a) whether the own-fund item is subject to legal or regulatory requirements that restrict the ability of that item to absorb all types of losses wherever they arise in the group; b) whether there are legal or regulatory requirements that restrict the transferability of assets to another undertaking; c) whether making those own funds available for covering the group SCR would not be possible within a maximum of 9 months; and d) whether, where Method 2 is used, the own-fund item does not satisfy the requirements set out in Article 71, 73 and 77 of the Solvency 2 Technical Standards (and, for this purpose, the term ‘SCR’ shall include both the SCR of the related undertaking that has issued the own-fund item and the group SCR).
3.14. In the assessment referred to above, the GFSC will consider the restrictions that would
exist on a going-concern basis. The GFSC will also take into account any costs to the participating insurance or reinsurance undertaking or insurance holding company, or to any related undertaking, that making such own funds available for the group is likely to entail.

Gibraltar Financial Services Commission Guidance Note on the GFSC’s Approach to Insurance Group Supervision 8
4. Third countries
Participating undertakings: Calculation of group solvency
4.1. Where the calculation of group solvency under Method 2 includes a third country insurance or
reinsurance undertaking which is a participating undertaking4 in a third country insurance or reinsurance undertaking, the latter will be treated for the purposes of that calculation as a related insurance or reinsurance undertaking5 . Inclusion of a third-country insurance or reinsurance undertaking under Method 2
4.2. Where the law of the third country in which an undertaking described in paragraph 4.1 has its
head office requires the undertaking to be authorised (however this may be described) and imposes on it a solvency regime which, in accordance with regulation 238 of the Insurance Companies Regulations, is determined to be equivalent to that set out in Part 6 of those regulations, the GFSC may permit the calculation to take into account, as regards that undertaking, the SCR and the own funds eligible to satisfy that requirement as prescribed by the law in that third country.
4.3. When considering whether a group could be eligible for the measure in paragraph 4.2, the GFSC
will consider whether:
a) the amount and quality of information available in relation to a related undertaking in the sub-group would not be sufficient for it to be subject to Method 1; b) any of the related undertakings in the sub-group are not covered by a group internal model, in the cases where a group internal model with an internal model permission, is used for the calculation of the consolidated group SCR; c) for the purposes of paragraph (b), the risks that are not captured in the group internal model are immaterial in relation to the overall risk profile of the group; d) the nature, scale, and complexity of the risks of the group are such that the use of Method 2 in relation to the sub-group does not materially affect the results of the group solvency calculation; e) transactions between the sub-group and the rest of the group are not significant both in terms of volume and value of the transaction; f) the sub-group is managed as a single economic unit distinct from the rest of the group; and 4 ‘Participating undertaking’ means an undertaking which is either a parent undertaking or another undertaking which holds a participation, or an undertaking linked with another undertaking by a common management relationship. 5 ‘Related undertaking’ means a subsidiary undertaking, another undertaking in which a participation is held or an undertaking linked with another undertaking by a common management relationship.

Gibraltar Financial Services Commission Guidance Note on the GFSC’s Approach to Insurance Group Supervision 9 g) the use of Method 1 in relation to related undertakings that make up the sub-group would be overly burdensome. Parent undertaking outside Gibraltar: absence of equivalence
4.4. In the absence of a determination of equivalence in accordance with regulation 238 of the
Insurance Companies Regulations, the GFSC may, under regulation 239(5)(b) of those regulations, direct the group to establish an insurance holding company or mixed financial holding company with its head office in Gibraltar. The GFSC may give a direction subject to conditions or revoke or vary a direction6 . Note that a direction may, in particular, require the group to establish an insurance holding company or mixed financial holding company with its head office in Gibraltar7 . Parent undertakings outside Gibraltar: levels
4.5. The GFSC may in the absence of an equivalence determination8
verify equivalence or undertake group supervision, at a lower level where a parent undertaking of insurance or reinsurance undertakings exists, whether at the level of a third-country insurance holding company, a third country mixed financial holding company, a third-country insurance undertaking or a third￾country reinsurance undertaking.
4.6. In these circumstances, regulation 237 of the Insurance Companies Regulations applies with any
necessary modifications at that lower level. The GFSC will explain its decision to the group to which the insurance undertaking or reinsurance undertaking belongs.
5. Temporary use of more than one calculation approach
5.1. Under certain circumstances, the GFSC may temporarily allow a group to use more than one
calculation approach when calculating the group SCR under Method 1. In determining whether or not to grant this permission, the GFSC would be exercising its power under regulation 209(4A) of the Insurance Companies Regulations in accordance with regulation 276A of those Regulations. The temporary use of more than one calculation approach may be permitted during the interim period before a new or enlarged group internal model has been granted permission, or before new group-specific parameters have been approved for an enlarged group. The GFSC expects the group to make a formal application to the GFSC for permission to use more than one calculation approach when calculating the group SCR under Method 1. In assessing whether the temporary use of more than one calculation approach may be permitted, the GFSC’s assessment will be based on the following factors:
a) where applicable, each internal model has previously received permission by the GFSC and continues to cover the same entities it covered when the permission was granted; 6 Regulation 239(6) of the Insurance Companies Regulations 7 Regulation 239(7) of the Insurance Companies Regulations 8 Regulation 237 of the Insurance Companies Regulations

Gibraltar Financial Services Commission Guidance Note on the GFSC’s Approach to Insurance Group Supervision 10 b) the group SCR calculation covers all material risks to which the group is exposed, and the risk profile of the group should not deviate significantly from the assumptions underlying the overall calculation of the group SCR; c) intra-group transactions between group entities that are not covered by the same calculation approach for the group SCR calculation are not significant in terms of either volume or value of transactions; and d) a clear and realistic plan to develop a group internal model that covers all group entities within a set period of using multiple calculation approaches at group level.
5.2. The GFSC considers the use of the option set out in paragraph 5.1 would be for a period of two
years, while a group internal model (or group-specific parameters) is under development. Any extension beyond the two-year period proposed would be at the discretion of the GFSC, taking into account the group’s specific circumstances. The GFSC considers the long-term use of multiple Method 1 calculation approaches in a single group to be inconsistent with the principle that a group should be supervised as a single economic unit.
5.3. Any subsequent applications for permissions for an additional internal model to be used under
paragraph 5.1 will be subject to further assessment of the factors in paragraph 5.1 (a) to (d).
5.4. Any subsequent extensions of the period in which paragraph 5.1 is used will be subject to further
assessment of the factors in paragraph 5.1 (a) to (d). If the GFSC previously imposed a capital add-on or other formal requirement on an undertaking or group that uses the same calculation approach under paragraph 5.1 as when the capital add-on or formal requirement was imposed, the capital add-on or formal requirement will continue to apply with respect to that part of the group.
5.5. The GFSC may consider whether the capital add-on or other formal requirement should be
increased or extended on account of changes that have occurred at the wider group.
5.6. The factor set out under paragraph 5.1 (d) may require a period of time to develop. Where the
GFSC considers it is otherwise appropriate to give an undertaking this permission based on the factors in paragraph 5.1 (a) to (c), the GFSC may consider a temporary modification for a period of 6 months allowing a group to use more than one calculation approach when calculating the group SCR under Method 1 while a clear and realistic plan is developed. After a period of 6 months, and upon satisfactory review of the plan by the GFSC, the GFSC may grant use of the option set out in paragraph 5.1.

Gibraltar Financial Services Commission Guidance Note on the GFSC’s Approach to Insurance Group Supervision 11
6. Risk concentration and intra-group transactions
Supervision of risk concentration and intra-group transactions
6.1. Where the GFSC is the group supervisor for a type of group referred to in regulation 192(3) of
the Insurance Companies Regulations, the GFSC will:
a) identify the type of risks and intra-group transactions that undertakings in the group are required to report to the GFSC under regulations 221(2) and (3) and 222(2) to (4) of the Insurance Companies Regulations and Articles 376(2) and 377 of the Solvency 2 Technical Standards in all circumstances, taking into account the specific group and risk management structure of the group; b) identify appropriate thresholds based on SCR, or technical provisions, in order to identify which risk concentrations and intra-group transactions must be reported due to them being considered significant; c) identify the insurance holding company, mixed financial holding company or insurance or reinsurance undertaking in the group responsible for submitting the information required under regulations 221(2) and (3) and 222(2) to (4) of the Insurance Companies Regulations and Article 376(2) of the Solvency 2 Technical Standards where the group is not headed by an insurance or reinsurance undertaking; and d) review the risk concentrations and intra-group transactions at the group level, and in particular monitor the possible risk of contagion within the group, the risk of a conflict of interests and the level or volume of risks.
6.2. The GFSC will consult the group while carrying out the activities referred to in paragraph 6.1(a)
to (c).
6.3. For the purposes of paragraph 6.1(b), when identifying appropriate thresholds in a particular
group for significant risk concentrations to be reported, the GFSC will consider the following elements:
a) the solvency and liquidity position of the group; b) the complexity of the structure of the group; c) the importance of regulated entities from other financial sectors or non-regulated entities carrying out financial activities; d) the diversification of the group’s investments portfolio; and e) the diversification of the group’s insurance activities, in terms of geographical areas and lines of business.

Gibraltar Financial Services Commission Guidance Note on the GFSC’s Approach to Insurance Group Supervision 12 Intra-group transactions in groups headed by mixed-activity insurance holding companies.
6.4. The matters set out in paragraphs 6.1 to 6.3 apply to the transactions reported under regulation
241 of the Insurance Companies Regulations by groups headed by a mixed activity insurance holding company. Conditions under which the GFSC may not supervise risk concentrations or intra-group transactions.
6.5. Where the GFSC is the group supervisor of a type of group within regulation 192(3)(a) and (b) of
the Insurance Companies Regulations, the GFSC may decide not to carry out either or both of the following:
a) the supervision of risk concentration referred to regulation 221 of the Insurance Companies Regulations; and b) the supervision of intra-group transactions referred to in regulation 222 of the Insurance Companies Regulations.
6.6. In making such a decision, the GFSC will need to be satisfied that:
a) the group contains an insurance or reinsurance undertaking and either:
i. the parent undertaking of which is an insurance holding company or a mixed financial
holding company which has its head office in Gibraltar or the UK; or
ii. the undertaking is a participating undertaking in at least one insurance undertaking,
reinsurance undertaking, third country insurance undertaking or third country reinsurance undertaking; and b) the participating insurance or reinsurance undertaking or the insurance holding company or mixed financial holding company referred to in regulation 192(3)(a) or (b) is a related undertaking of a regulated entity or mixed financial holding company that has its head office in Gibraltar, and which is subject to supplementary supervision in accordance with regulation 5 of the Financial Conglomerates Regulations.
6.7. Where the participating insurance or reinsurance undertaking or the insurance holding company
or mixed financial holding company referred to in regulation 192(3)(a) or (b) is a subsidiary of:
i. another insurance or reinsurance undertaking;
ii. another insurance holding company; or
iii. another mixed financial holding company;
which has its head office in Gibraltar or the United Kingdom, regulations 197 to 236 only apply at the level of the ultimate parent insurance or reinsurance undertaking, insurance holding company or mixed financial holding company which has its head office in Gibraltar or the United Kingdom.

Gibraltar Financial Services Commission Guidance Note on the GFSC’s Approach to Insurance Group Supervision 13
7. Scope of group supervision
7.1. The GFSC’s exercise of group supervision in accordance with regulation 192 of the Insurance
Companies Regulations does not imply that the GFSC is required to play a supervisory role in relation to a third-country insurance undertaking, a third-country reinsurance undertaking, an insurance holding company, a mixed financial holding company or a mixed-activity insurance holding company taken individually (without limiting regulation 235 of the Insurance Companies Regulations, as far as insurance holding companies or mixed financial holding companies are concerned).
7.2. The GFSC may decide on a case-by-case basis not to include an undertaking in group supervision
under regulation 192 of the Insurance Companies Regulations where:
a) the undertaking is situated in a third country where there are legal impediments to the transfer of the necessary information (without limiting regulation 208 of the Insurance Companies Regulations); b) the undertaking is of negligible interest with respect to the objectives of group supervision (except where several undertakings of the same group which are negligible individually, are not negligible when taken collectively); or c) the inclusion of the undertaking would be inappropriate or misleading with respect to the objectives of the group supervision.
7.3. Where the GFSC ceases to apply group supervision to an insurance or reinsurance undertaking
under regulation 193(2)(b) or (c) of the Insurance Companies Regulations, the GFSC may ask the undertaking which is at the head of the group for any information which may facilitate supervision of the insurance or reinsurance undertaking.

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