Order on the Calculation of the Capital Base and Solvency Capital Requirements for Groups

Pursuant to Section 166, paragraph 10, and Section 316, paragraph 1, of Act No. 718 of 13 June 2023 on insurance business, the following is prescribed:

Chapter 1

General Provisions

Scope and Definitions

Section 1. This Order applies to groups and undertakings covered by Section 166, paragraphs 1 and 2, of the Act on Insurance Business, subject to paragraph 2.

Paragraph 2. Chapter 4 of this Order applies to groups where the parent undertaking of a Group 1 insurance undertaking has its head office in a country outside the European Union with which the Union has not concluded an agreement in the financial area, and the parent undertaking is a third-country insurance undertaking, or an insurance holding company or a mixed financial holding company, as defined in Article 212, paragraph 1, points (f) and (g), of Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), as amended by Directive 2011/89/EU of the European Parliament and of the Council amending Directives 98/78/EC, 2002/87/EC, 2006/48/EC and 2009/138/EC as regards the supplementary supervision of financial entities in a financial conglomerate.

Paragraph 3. The calculation of the capital base and the solvency capital requirement for groups or undertakings shall, in addition to the rules in Articles 329-342 of Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), be carried out in accordance with this Order.

Paragraph 4. The provisions regarding participating insurance undertakings in this Order apply mutatis mutandis to holding companies covered by Section 166, paragraph 1, of the Act on Insurance Business.

Section 2. In this Order, the following definitions apply:

1. Solvency Balance Sheet: A balance sheet with assets and liabilities, where the valuation of assets and liabilities is carried out in accordance with the Order on the valuation of assets and liabilities, including insurance technical provisions for Group 1 insurance undertakings and others.

2. Group Solvency: Group solvency is calculated as the difference between the group's or undertaking's calculated capital base and the calculated solvency capital requirement for the group or undertaking, pursuant to Section 4, paragraph 2, and Section 6, paragraph 2.

3. Participating Undertaking: An undertaking which is a parent undertaking, an undertaking holding a qualifying holding, or an undertaking linked to another undertaking as referred to in Article 22, paragraph 7, of Directive 2013/34/EU.

4. Participating Insurance Undertaking: A participating undertaking that is an insurance undertaking.

5. Linked Undertaking: An undertaking which is a subsidiary, an undertaking in which a qualifying holding is held, or an undertaking linked to another undertaking as referred to in Article 22, paragraph 7, of Directive 2013/34/EU.

6. Linked Insurance Undertaking: A linked undertaking that is an insurance undertaking.

7. Third-Country Insurance Undertaking: An undertaking which, if its head office were located in the European Union, or in a country outside the European Union with which the Union has concluded an agreement in the financial area, would require authorization as an insurance undertaking.

8. College of Supervisors: The group supervisor under the Solvency II Directive, the supervisory authorities in all Member States where the subsidiaries' head offices are located, and the European Insurance and Occupational Pensions Authority (EIOPA) in accordance with Article 21 of Regulation (EU) No 1094/2010.

Chapter 2

Choice of Method

Section 3. The capital base and solvency capital requirement for the group or undertaking shall be calculated in accordance with Method 1, pursuant to Section 4.

Paragraph 2. The capital base and solvency capital requirement for the group or undertaking may be calculated in accordance with Method 2, pursuant to Section 6, or a combination of Method 1 and 2, provided that the Danish Financial Supervisory Authority (Finanstilsynet) approves this. The Danish Financial Supervisory Authority approves the use of Method 2, or a combination of Method 1 and 2, if the Authority assesses that the use of Method 1 for the relevant group or undertaking is inappropriate.

Method 1

Section 4. In addition to the rules in Articles 335 and 337-340 of Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), paragraph 2 applies when calculating group solvency under Method 1.

Paragraph 2. When using Method 1, group solvency shall be calculated based on the accounting consolidation of the solvency balance sheet as the difference between:

1. The capital base to cover the solvency capital requirement in Danish kroner for the group or undertaking, calculated on the basis of an accounting consolidation of the solvency balance sheets of the undertakings in the group or undertaking, and

2. The solvency capital requirement calculated in accordance with Article 336 of Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II).

Paragraph 3. The participating insurance undertaking must provide the Danish Financial Supervisory Authority with information that makes it possible to understand the difference between the sum of the solvency capital requirements for all insurance undertakings in the group or undertaking and the group's or undertaking's consolidated solvency capital requirement.

Section 5. The solvency capital requirement for the group or undertaking, pursuant to Section 4, paragraph 2, point 2, shall at a minimum amount to the sum of the minimum capital requirement for the participating insurance undertaking and the proportional share, pursuant to Section 7, paragraph 2, of the minimum capital requirement for all linked insurance undertakings.

Paragraph 2. The amount in paragraph 1 must be covered by a basic capital base that can be used to cover the minimum capital requirement for the group or undertaking, calculated on the basis of an accounting consolidation of the solvency balance sheets, pursuant to Sections 4, 8-14, and 19-24.

Paragraph 3. If the basic capital base for the group or undertaking does not meet the minimum amount in paragraph 1, first sentence, Section 224 of the Act on Insurance Business and the Order on business plans, recovery plans, financing plans, and individual solvency needs for insurance undertakings shall apply.

Method 2

Section 6. In addition to the rules in Article 342 of Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), paragraphs 2-4 apply to the calculation of group solvency to be carried out under Method 2.

Paragraph 2. When using Method 2, group solvency shall be calculated based on deduction and aggregation as the difference between:

1. The group's or undertaking's aggregated capital base to cover the solvency capital requirement for the group or undertaking, and

2. The value of the linked insurance undertakings under the participating insurance undertaking and the group's or undertaking's aggregated solvency capital requirement.

Paragraph 3. The group's or undertaking's aggregated capital base to cover the solvency capital requirement for the group, pursuant to paragraph 2, point 1, is calculated as the sum of:

1. The capital base to cover the solvency capital requirement for the participating insurance undertaking, and

2. The participating insurance undertaking's proportional share in the capital base to cover the solvency capital requirement for the linked insurance undertakings, pursuant to Section 8.

Paragraph 4. The group's aggregated solvency capital requirement, pursuant to paragraph 2, point 2, is calculated as the sum of:

1. The solvency capital requirement for the participating insurance undertaking, and

2. The participating insurance undertaking's proportional share of the solvency capital requirement for the linked insurance undertakings, pursuant to Section 8.

Paragraph 5. If a participating insurance undertaking holds capital interests that wholly or partially entail indirect ownership in a linked insurance undertaking, the proportional value thereof, pursuant to Section 8, shall be included in the calculations under paragraph 3, point 2, and paragraph 4, point 2.

Chapter 3

General Principles for Calculation of the Capital Base

Section 7. In addition to the rules in Articles 330-334 of Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), Sections 8-14 apply when calculating the capital base for the group, pursuant to Section 166, paragraph 2, of the Act on Insurance Business, regardless of whether Method 1, Method 2, or a combination of Method 1 and 2 is used.

Proportional Shares

Section 8. When calculating group solvency, the proportional share that the participating undertaking holds in its linked undertakings shall be included. When using Method 1, the share is calculated as the percentage of the subscribed capital used in the consolidation of the solvency balance sheets. When using Method 2, the share is calculated as the part of the subscribed capital directly or indirectly held by the participating undertaking.

Paragraph 2. The participating insurance undertaking must include subsidiaries that do not hold a sufficient capital base to cover the undertaking's calculated solvency capital requirement as if they were wholly owned when calculating group solvency.

Paragraph 3. The participating insurance undertaking may include subsidiaries referred to in paragraph 2 on a proportional basis relative to the share for which liability is borne, provided the Danish Financial Supervisory Authority approves this. The Danish Financial Supervisory Authority approves proportional inclusion if the Authority assesses that the ultimate parent undertaking is liable only for the share that the undertaking holds in the subsidiary.

Elimination of Double Counting of the Capital Base

Section 9. When calculating the capital base for the group or undertaking, there must be no double counting of the capital base to cover the solvency capital requirement among the insurance undertakings included.

Paragraph 2. When calculating group solvency, the following items shall be eliminated, if not already done through the use of Method 1, Method 2, or a combination of Method 1 and 2:

1. The value of any asset belonging to the participating insurance undertaking that constitutes a financing capital base element to cover the solvency capital requirement for a linked insurance undertaking.

2. The value of any asset belonging to a linked insurance undertaking under the participating insurance undertaking that constitutes a financing capital base element to cover the solvency capital requirement for that linked insurance undertaking.

3. The value of any asset belonging to a linked insurance undertaking under the participating insurance undertaking that constitutes a financing capital base element to cover the solvency capital requirement for any other linked insurance undertaking under that participating insurance undertaking.

Section 10. When calculating the capital base for the group or undertaking, the following capital base elements may only be included if they can be used to cover the solvency capital requirement for a linked insurance undertaking:

1. Surplus capital classified as Tier 1 capital in accordance with Article 69, point (a), point (iv), of Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) in a linked insurance undertaking under the participating insurance undertaking that conducts insurance business covered by Annex 2 to the Act on Insurance Business.

2. Subscribed but unpaid capital shares in linked insurance undertakings under the participating insurance undertaking, subject to paragraph 2.

Paragraph 2. The following capital base elements may not be included in the calculation under paragraph 1:

1. Subscribed but unpaid capital shares that constitute a potential obligation for the participating insurance undertaking.

2. Subscribed but unpaid capital shares in the participating insurance undertaking that constitute a potential obligation for a linked insurance undertaking.

3. Subscribed but unpaid capital shares in a linked insurance undertaking that constitute a potential obligation for another linked insurance undertaking under the same participating insurance undertaking.

Section 11. If the Danish Financial Supervisory Authority assesses that certain other capital base elements than those mentioned in Section 10, paragraph 1, which are to be used to cover the solvency capital requirement for a linked insurance undertaking, are not actually available to cover the solvency capital requirement for the participating insurance undertaking, these elements may only be included in the calculation of group solvency if the Danish Financial Supervisory Authority approves this. The Danish Financial Supervisory Authority approves that a capital base element may be included if the Authority assesses that the capital base elements can be used to cover the solvency capital requirement for a linked insurance undertaking.

Section 12. The sum of the capital base elements mentioned in Sections 10 and 11 must not exceed the solvency capital requirement for the relevant linked insurance undertaking.

Section 13. When calculating group solvency, supplementary capital base in a linked insurance undertaking is only included when its use has been approved by the supervisory authority responsible for the supervision of that linked insurance undertaking.

Elimination of Capital Created Within a Group or Undertaking

Section 14. When calculating group solvency, no account shall be taken of a capital base to cover the solvency capital requirement that stems from mutual financing between the participating insurance undertaking and any of the following:

1. A linked undertaking.

2. A participating undertaking.

3. Another linked undertaking under one of the participating undertakings of the participating insurance undertaking.

Paragraph 2. In the calculation of group solvency, no account shall be taken of a capital base to cover the solvency capital requirement for a linked insurance undertaking under the participating insurance undertaking for which group solvency is being calculated, when that capital base stems from mutual financing with any other linked undertaking under the participating insurance undertaking.

Paragraph 3. Mutual financing is considered to exist when an insurance undertaking or an undertaking linked to it holds shares in or grants loans to another undertaking that directly or indirectly holds a capital base to cover the first-mentioned insurance undertaking's solvency capital requirement.

Chapter 4

Parent Undertakings Outside the European Union

Section 15. The Danish Financial Supervisory Authority, with the assistance of the European Insurance and Occupational Pensions Authority (EIOPA), shall determine whether a group covered by Section 1, paragraph 2, is subject to supervision exercised by a third-country supervisory authority that is equivalent to that prescribed in Denmark for undertakings covered by Section 166, paragraphs 1 and 2, of the Act on Insurance Business, if the following conditions are met:

1. The Danish Financial Supervisory Authority would be the group supervisor under the Solvency II Directive.

2. The parent undertaking or a Group 1 insurance undertaking in the group requests the Danish Financial Supervisory Authority to carry out the assessment.

3. The Commission has not already made a decision on this matter.

Paragraph 2. If the group supervision is assessed to be equivalent, the Danish Financial Supervisory Authority shall rely on the group supervision exercised by the supervisory authorities in the third country. The first sentence applies mutatis mutandis in cases where the Commission has made a decision on equivalence.

Section 16. In cases where a group covered by Section 1, paragraph 2, is not subject to supervision equivalent to that prescribed in Denmark for undertakings covered by Section 166, paragraphs 1 and 2, of the Act on Insurance Business, and where the Danish Financial Supervisory Authority would be the group supervisor under the Solvency II Directive, the rules in Section 166 of the Act on Insurance Business, and rules issued pursuant thereto, shall apply with the necessary adjustments to the group.

Paragraph 2. Paragraph 1 applies mutatis mutandis to groups covered by Section 1, paragraph 2, in cases where the Danish Financial Supervisory Authority would be the group supervisor under the Solvency II Directive, and the Commission has made a decision that the supervisory scheme in a third country is temporarily equivalent, but the Danish Financial Supervisory Authority has decided not to rely on the equivalent group supervision exercised by the supervisory authorities in the third country, because a Group 1 insurance undertaking in the group has a total balance sheet exceeding the balance sheet total of the parent undertaking located in the third country.

Paragraph 3. When calculating the capital base for use in calculating group solvency, the parent undertaking, in cases covered by paragraphs 1 and 2, shall be treated as a Group 1 insurance undertaking.

Paragraph 4. Solvency capital requirements for use in calculating group solvency shall be calculated, in cases covered by paragraphs 1 and 2, according to the principles in Section 19 when it concerns an insurance holding company or a mixed financial holding company, and according to the principles in Section 20 when it concerns a third-country insurance undertaking.

Paragraph 5. In cases covered by paragraphs 1 and 2, the Danish Financial Supervisory Authority may, after consulting relevant supervisory authorities in other countries within the European Union or in countries with which the Union has concluded an agreement in the financial area, decide to apply other methods than the rules mentioned in paragraph 1, which ensure appropriate supervision of the Group 1 insurance undertakings in the group, including requiring that an insurance holding company or a mixed financial holding company be established in a country within the European Union or in a country with which the Union has concluded an agreement in the financial area.

Section 17. The assessment of equivalence under Section 15 is carried out on the top undertaking in the group.

Paragraph 2. If the top undertaking in the group is assessed not to be subject to equivalent supervision, a decision may be made to carry out an equivalence check at a lower level, provided the decision is justified to the group.

Chapter 5

Inclusion of Affiliated Companies in the Group in the Calculation of Group Solvency

Section 18. In addition to the rules in Article 329 of Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), Sections 19-24 apply when including affiliated companies in the group in the calculation of group solvency.

Linked Insurance Undertakings

Section 19. When a participating insurance undertaking has more than one linked insurance undertaking, each of these linked undertakings shall be included in the calculation of group solvency.

Paragraph 2. If the linked insurance undertaking is established in another country within the European Union, or in a country with which the Union has concluded an agreement in the financial area, the calculation of group solvency shall take into account the linked undertaking's solvency capital requirement and capital base to cover the solvency capital requirement, as calculated in that country.

Intermediate Holding Companies

Section 20. When calculating group solvency for a participating insurance undertaking that, through an insurance holding company or a financial holding company meeting the conditions in Section 9, paragraph 1, point 9, of the Act on Insurance Business, holds a capital interest in a linked insurance undertaking, including third-country insurance undertakings, the situation in the intermediate holding company shall be taken into account.

Paragraph 2. In cases covered by paragraph 1, the participating insurance undertaking shall treat an intermediate holding company as an insurance undertaking covered by the Order on the calculation of the capital base for Group 1 insurance undertakings and others, the Order on the calculation of the solvency capital requirement using the standard formula for Group 1 insurance undertakings and others, and the Order on the calculation of the solvency capital requirement using an internal model for Group 1 insurance undertakings and others.

Paragraph 3. The participating insurance undertaking may include subordinated debt and other capital elements in an intermediate holding company in the capital base to cover the solvency capital requirement for the group, up to the monetary limits calculated based on the limit values in Article 82 of Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II).

Paragraph 4. The participating insurance undertaking may include supplementary capital base in an intermediate holding company in the capital base to cover the solvency capital requirement for the group, which would require approval pursuant to Section 153, paragraph 1, second sentence, of the Act on Insurance Business, provided the Danish Financial Supervisory Authority approves this.

Linked Third-Country Insurance Undertakings

Section 21. When calculating group solvency in accordance with Method 2, pursuant to Section 6, for an insurance undertaking that is a participating company in a third-country insurance undertaking, the third-country insurance undertaking shall be treated as a linked insurance undertaking.

Paragraph 2. When calculating group solvency, account shall be taken of the solvency capital requirement and the capital base to cover the solvency capital requirement for the linked third-country insurance undertaking, as calculated in accordance with the relevant third-country's rules, when the country where the linked third-country insurance undertaking has its head office requires authorization and applies solvency rules that correspond at least to those set out in the Act on Insurance Business and rules issued pursuant thereto.

Section 22. The Danish Financial Supervisory Authority, with the assistance of the European Insurance and Occupational Pensions Authority (EIOPA), shall determine whether the linked third-country insurance undertaking is subject to supervision exercised by a third-country supervisory authority that is equivalent to that prescribed in Denmark for Group 1 insurance undertakings, if all the following conditions are met:

1. The Danish Financial Supervisory Authority would be the group supervisor under the Solvency II Directive.

2. The participating undertaking requests...