Article 18 Capital Instruments of Third Country Insurance and Reinsurance Undertakings for the Purposes of Article 36(3) of the CRR

1.

Holdings of capital instruments of third country insurance and reinsurance undertakings that are situated in a third country which is not an overseas jurisdiction designated under regulation 11 in relation to regulation 13 of the IRPR regulations in respect of the insurance group capital requirements calculation shall be deducted as follows:

  1. (a) all instruments which qualify as capital under the company law applicable to the third country insurance and reinsurance undertakings that issued them, and which are included in the highest quality Tier of regulatory own funds without any limits under the third-country regime shall be deducted from Common Equity Tier 1 items;
  2. (b) any subordinated instruments absorbing losses on a going-concern basis, including the discretion to cancel coupon payments, shall be deducted from Additional Tier 1 items. Where the amount of these subordinated instruments exceeds the amount of Additional Tier 1 capital, the excess amount shall be deducted from Common Equity Tier 1 items;
  3. (c) any other subordinated instruments shall be deducted from Tier 2 items. Where the amount of these subordinated instruments exceeds the amount of Tier 2 capital, the excess amount shall be deducted from Additional Tier 1 items. Where this excess amount exceeds the amount of Additional Tier 1 capital, the remaining excess amount shall be deducted from Common Equity Tier 1 items;
  4. (d) for third country insurance and reinsurance undertakings that are subject to prudential solvency requirements, any other instruments included in the third country insurance and reinsurance undertakings' own funds pursuant to the relevant applicable solvency regime or any other instruments for which the institution is not able to demonstrate that conditions (a), (b) or (c) apply shall be deducted from Common Equity Tier 1 items.

2.

Where the third country is an overseas jurisdiction designated under regulation 11 in relation to regulation 13 of the IRPR regulations in respect of the insurance group capital requirements calculation, including the third country’s rules on own funds,

  1. (a) [deleted]
  2. (b) [deleted]

holdings of capital instruments of the third-country insurance or reinsurance undertakings shall be treated as holdings of capital instruments of insurance or reinsurance undertakings within the meaning of 'insurance undertaking' and 'reinsurance undertaking' in section 417(1) of FSMA.

3.

In the cases foreseen in paragraph 2 of this Article, institutions shall apply the deductions as foreseen by point (b) of Article 44, point (b) of Article 58 and point (b) of Article 68 of the CRR, as applicable, for holdings of own funds insurance items.

[Note: This rule corresponds to Article 18 of Part 2 of Regulation (EU) No 241/2014 as it applied immediately before revocation by the Treasury.]