Classification of items of own funds

(1) Insurance undertakings must classify their items of own funds into three tiers.
(2) The classification of items of own funds depends on whether they are basic own funds or ancillary own funds, and on the extent to which they
1. are available or can be called up to absorb losses fully on a going-concern basis and in the event of winding-up, and
2. are subordinated to all other liabilities in the event of winding-up.
(3) In assessing the extent to which items of own funds currently and in future display the characteristics named in subsection (2), their duration must be taken into account. Where the duration is fixed, a comparison of the fixed duration with the average duration of the undertaking's insurance obligations must be included in the assessment.
(4) It must additionally be taken into account whether and to what extent an item of own funds is free of
1. obligations or incentives to redeem the nominal amount,
2. mandatory fixed charges, and
3. other encumbrances.
(5) The classification requires the approval of the supervisory authority. This does not apply to items of own funds whose classification is made known in delegated acts of the European Commission.