S.L. 403.23 Art. 16Transitional measures on the technical provisions.

(1) An authorised insurance undertaking or an authorised reinsurance undertaking may subject to the prior approval of the competent authority:

(a) apply a transitional deduction to its technical provisions or to such of its technical provisions as are contained within homogeneous risk groups as referred to in Article 80 of the Solvency II Directive;

(b) or on the request of the competent authority, recalculate the amount of technical provisions, including where applicable the amount of volatility adjustment, used to calculate the transitional deduction pursuant to sub-regulation (3) every 24 months, or more frequently where the risk profile of the undertaking has materially changed.

(2) The transitional deduction shall correspond to a portion of the difference between the following two amounts:

(a) the technical provisions after deduction of the amounts recoverable from reinsurance contracts and reinsurance special purpose vehicles, calculated in accordance with Article 76 of the Solvency II Directive as at 1 January 2016;

(b) the technical provisions after deduction of the amounts recoverable from reinsurance contracts calculated in accordance with Article 15 of Directive 73/239/EC, Article 20 of Directive 2002/83/EC and Article 32 of Directive 2005/68/EC as at 31 December 2015.

(3) The competent authority may limit the deduction referred to in sub-regulation (2) if its application could result in a reduction of the financial resources requirements that apply to the insurance or reinsurance undertaking when compared with those calculated in accordance with Directive 73/239/EEC, Directive 2002/83/EC and Directive 2005/68/EC on 31 December 2015.

(4) The maximum portion deductible shall decrease linearly at the end of each year from 100% during the year starting from 1 January 2016 to 0% on 1 January 2032.

(5) Where an authorised insurance undertaking or an authorised reinsurance undertaking applies on 1 January 2016 the volatility adjustment referred to in Article 77d of the Solvency II Directive, the amount referred to in sub-regulation (2)(a) shall be calculated with the volatility adjustment at that date.

(6) An authorised insurance or reinsurance undertaking applying the transitional deduction referred to in sub-regulation (1)(a) shall:

(a) not apply regulation 15;

(b) when such undertaking does not comply with the Solvency Capital Requirement without the application of the transitional deduction, submit annually a report to the competent authority setting out measures taken and the progress made to re-establish at the end of the transitional period set out in sub-regulation (2) a level of eligible own funds covering the Solvency Capital Requirement or to reduce its risk profile to restore compliance with the Solvency Capital Requirement;

(c) as part of its report on its solvency and financial condition referred to in Insurance Rules issued pursuant to article 18F of the Act, publicly disclose that it applies the transitional deduction to the technical provisions, and the quantification of the impact of not applying that transitional deduction on its financial position.