Appendix
Indicative mapping of application content to statutory conditions
| Statutory Conditions for supervisory approval of VA | ||||
| Solvency II Directive Reference | Item in application | VA is correctly applied | Use of VA is consistent with other relevant requirements | VA does not create an incentive for pro-cyclical investment behaviour |
| 41(3) | Policy on the criteria for the application of the VA. |
Description of obligations to which the VA will be applied, including currency and country of sale. Confirmation that the MA is not applied to the same obligations. |
Description of how assets held by the firm are invested consistently with the Prudent Person Principle, given that the firm applies the VA. Evidence that liability features, eg surrender terms, are taken into account when deciding whether to apply the VA. |
Description of the link between investment policy and use of the VA. |
| 44(2a) | Sensitivity of technical provisions and eligible own funds to underlying assumptions. | Sensitivity analysis demonstrating that the firm understands the key drivers that would cause the VA to move and the resultant effect on technical provisions and own funds. | ||
| 44(2a) | Possible effect of forced sales of assets on own funds. | Demonstration that the possible forced sale of assets under stressed conditions would not have a material effect on the level of own funds. | ||
| 44(2a) | Impact of a reduction of the VA to zero. | Quantitative illustration of effect of the VA on the firm's financial position, including technical provisions, own funds, and capital requirements. | Qualitative description of further impacts/actions the firm would take of the VA reduced to zero. | |
| 44(2) | Liquidity plan projecting the incoming and outgoing cash flows relating to assets and liabilities subject to VA. | Demonstration that the firm has adequate understanding, risk mitigation and financial resources to manage liquidity risk on the business to which the VA is applied. | Demonstration that firm has sufficient liquidity to meet claims on an ongoing basis during stressed periods without resorting to selling illiquid assets. | |
| 44(2a) | Remedial actions if reduction of VA to zero results in SCR Breach. | Demonstration that loss of the VA would not lead to pro-cyclical derisking activity. | ||
| 45(2a) | Own Risk and Solvency Assessment (ORSA) extract: Assessment of compliance with capital requirements, with and without VA. | Demonstration that the VA is adequately reflected in the ORSA. | ||
- 17/10/2018