French Insurance Code
In forceFor the undertakings referred to in Article L. 310-3-2, the minimum required solvency margin is determined, depending on the classes of business carried on, in accordance with the following provisions:
a) For classes 20 and 21 referred to in Articles R. 321-1 of this Code, R. 211-2 of the Mutual Code and R. 931-2-1 of the Social Security Code, with the exception of supplementary insurance or guarantees, the minimum margin requirement is calculated in relation to the provisions referred to in 1° and 4° of Article R. 343-3 and the capital at risk. This amount is equal to the sum of the following two results:
The first result is obtained by multiplying a number representing 4% of the sum of the provisions mentioned in 1° and 4° of article R. 331-3, relating to direct insurance operations without deduction of reinsurance cessions and to reinsurance acceptances, by the ratio existing, for the last financial year, between the amount of mathematical provisions after reinsurance cessions and the amount of mathematical provisions gross of reinsurance, without this ratio being less than 85%.
The second result is obtained by multiplying a number representing 0.3% of the capital at risk by the ratio existing, for the last financial year, between the amount of capital at risk after reinsurance cessions and retrocessions and the amount of capital at risk gross of reinsurance, without this ratio being less than 50%.
For term life insurance policies with a maximum term of three years, the capital at risk multiplier is equal to 0.1%. It is set at 0.15% for term insurance policies on death with a term of more than three years but not more than five years.
The capital at risk is equal to the death risk less the mathematical provision for the principal risk;
b) For insurance or guarantees supplementary to contracts involving commitments resulting from operations classified in classes 20, 21 and 22, the minimum margin requirement is equal to the minimum solvency margin requirement for insurance undertakings, as set out in article R. 334-5 ;
c) For class 23 referred to in Article R. 321-1 of this Code, the minimum margin requirement is equal to 1% of the assets of tontines;
d) For class 24 referred to in Articles R. 321-1 of the present code, R. 211-2 of the Code de la mutualité and R. 931-2-1 of the Code de la sécurité sociale, with the exception of capitalisation operations expressed in units of account, the minimum margin requirement is equal to the result obtained by multiplying a number representing 4% of the technical provisions relating to direct insurance operations and gross reinsurance acceptances by the ratio referred to in the first result defined in a ;
For mutual insurers and unions governed by Book II of the Mutual Code, by way of derogation from the preceding paragraph, the minimum margin requirement is equal to the result obtained by multiplying a number representing 4% of the sum of the mathematical provision and the management provision relating to direct insurance operations and gross reinsurance acceptances alone by the ratio referred to in the first result defined in a.
e) For class 22 mentioned in articles R. 321-1 of the present code, R. 211-2 of the code de la mutualité and R. 931-2-1 of the code de la sécurité sociale, with the exception of supplementary insurance or guarantees, for class 24 mentioned in articles R. 321-1 of the present code, R. 211-2 of the code de la mutualité and R. 931-2-1 of the Social Security Code, in the case of capitalisation operations expressed in units of account, and for class 25 referred to in articles R. 321-1 of this Code, R. 211-2 of the Mutual Code and R. 931-2-1 of the Social Security Code, the minimum margin requirement is equal to:
1. Where the undertaking assumes an investment risk, to a number representing 4% of the technical provisions relating to direct insurance operations and acceptances gross of reinsurance multiplied by the ratio referred to in the first result defined in a ;
2. Where the company does not assume an investment risk, to a number representing 1% of the technical provisions of the contracts multiplied by the ratio mentioned in the first result of a, provided that the amount intended to cover the management expenses provided for in these contracts is fixed for a period of more than five years;
3. Where the mutual or association governed by Book II of the Mutual Code does not assume any investment risk, and for contracts mentioned in Article L. 222-2 of the Mutual Code which provide that management expenses are not fixed for a period of more than five years, an amount equivalent to 25% of the net management expenses relating to these operations for the last financial year;
4. Where the undertaking assumes a mortality risk, the amount of the minimum margin requirement is obtained by adding to either of the results determined by applying the provisions of the three preceding paragraphs a number representing 0.3% of the capital at risk, multiplied by the ratio existing, for the last financial year, between the amount of capital at risk after reinsurance cessions and retrocessions and the amount of capital at risk gross of reinsurance, without this ratio being less than 50% ;
f) For class 26 referred to in articles R. 321-1 of this Code, R. 211-2 of the Mutual Code and R. 931-2-1 of the Social Security Code, the regulatory minimum margin is equal to 4% of the highest of the following values:
1. The theoretical mathematical provision referred to in article R. 441-21 calculated after reinsurance cessions ;
2.85% of this same provision calculated before reinsurance cessions.
For mutual insurers or unions governed by Book II of the Mutual Code, by way of derogation from the preceding paragraphs of f, the minimum margin requirement is equal to a number representing 4% of the special technical provision referred to in article R. 222-8 of the Mutual Code, within the limit of the theoretical mathematical provision referred to in article R. 222-16 of the same code.
For provident institutions and unions governed by Title 3 of Book 9 of the Social Security Code, by way of derogation from the preceding paragraphs of f, the minimum margin requirement is equal to a number representing 4% of the special technical provision referred to in Article R. 932-4-4 of the Social Security Code, within the limit of the theoretical mathematical provision referred to in Article R. 932-4-25 of the same code.
In addition, for the purpose of taking account of limited financial reinsurance in the reinsurance ratio referred to in the second and third paragraphs of a and in 3 of e, the Autorité de contrôle is based on the actual transfer of risk.
Upon application and justification by the undertaking to the Autorité de contrôle, and with the latter's agreement, amounts recoverable in respect of risks transferred to a securitisation vehicle mentioned in Article L. 310-1-2 may be treated as reinsurance cessions for the purposes of calculating the ratio mentioned in the second and third paragraphs of a and 3 of e.
The Autorité de contrôle takes into account the actual transfer of risk to assess the extent of the reduction in the solvency margin requirement authorised in respect of each transaction carried out with a securitisation vehicle. It also takes into account the ability of the securitisation vehicle to meet its commitments at all times.
