What, as a minimum, must an insurance holding company or mixed financial holding company be able to demonstrate in order for an issuable capital instrument to be considered unencumbered at group level?
If an insurance holding company or mixed financial holding company issues a capital instrument, it must be able to demonstrate that the capital instrument is free from encumbrances at group level and is not connected with any other transaction that could impair the quality of the instrument (Article 333(1), under b, of Commission Delegated Regulation (EU) 2015/35 (Solvency II)).
Taking into account recital 127 of the delegated regulation, we will consider this requirement to be satisfied at any rate if, in the case of the winding-up of an insurance or reinsurance undertaking belonging to the group, the claims arising from a capital instrument issued by an insurance holding company or mixed financial holding company rank after the claims of all policy holders and beneficiaries of the insurance or reinsurance undertaking.
This means that, if an insurance or reinsurance undertaking belonging to the group is wound up, repayment of the instruments must be suspended until the interests of policy holders and beneficiaries of that insurance or reinsurance undertaking have been satisfied or are satisfactorily addressed.
An insurance holding company or mixed financial holding company must be able to demonstrate that its capital instruments satisfy this requirement, for example by ensuring that this is explicitly laid down in the terms of the capital instrument.
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