Technical provisions

(1) Insurance undertakings may, with the approval of the supervisory authority, temporarily apply a deduction within the meaning of subsection (2) to technical provisions. The deduction may be applied at the level of homogeneous risk groups under section 75(3).
(2) The temporary deduction corresponds to a proportion of the difference between the following two amounts: 1. the technical provisions, after deduction of the amounts recoverable from reinsurance contracts and from special purpose entities, calculated under section 75 as at 1 January 2016; 2. the technical provisions, after deduction of the amounts recoverable from reinsurance contracts, calculated in accordance with the legal and administrative provisions formed under sections 341e to 341h of the Commercial Code and section 65 of the Insurance Supervision Act, in the versions respectively in force until 31 December 2015, and the statutory instruments issued under section 330 of the Commercial Code and section 65 of the Insurance Supervision Act, in the versions respectively in force until 31 December 2015. The maximum deductible proportion decreases linearly, at the end of each calendar year, from 100 percent during the year from 2016 to 0 percent on 1 January 2032. Where insurance undertakings apply the volatility adjustment under section 82 on 1 January 2016, the amount named in point 1 is calculated using the volatility adjustment in force on that date.
(3) The amounts of the technical provisions, and, where applicable, the amount of the volatility adjustment, used to calculate the temporary deduction under subsection (2), first sentence, points 1 and 2, may be recalculated, with the approval of, or, on the supervisory authority's request, must be recalculated, every 24 months, or more frequently where the undertaking's risk profile changes materially.
(4) The deduction under subsection (2) may be limited by the supervisory authority, where its application could result in the financial resources requirements applicable to the undertaking falling below the requirements calculated under the Commercial Code, the Insurance Supervision Act, and the statutory instruments issued for this purpose, in the versions respectively in force until 31 December 2015.
(5) Where insurance undertakings apply subsection (1), they may not apply section 351, and must 1. where they can satisfy the Solvency Capital Requirement only by applying the temporary deduction, submit to the competent supervisory authority, annually, a report setting out the measures necessary to raise the eligible own funds or to reduce the risk profile so that compliance with the Solvency Capital Requirement is achieved, and the progress made in this respect, and 2. disclose, within their solvency and financial condition report, that they apply the temporary deduction within the meaning of subsection (2) to the technical provisions, and quantify the effect of not applying this temporary deduction on their financial position.