French Insurance Code
In forceI.-The transitional deduction referred to in Article L. 351-5 corresponds to a fraction of the difference between the following two amounts:
a) the technical provisions after deduction of receivables arising from reinsurance contracts and securitisation vehicles, calculated in accordance with Article L. 351-2, as at 1 January 2016; and
b) Technical provisions after deduction of receivables arising from reinsurance contracts, calculated in accordance with the provisions in force at 31 December 2015.
The maximum deductible fraction decreases linearly at the end of each year, from 100% at 1 January 2016 to 0% at 1 January 2032.
Where insurance and reinsurance undertakings apply the volatility adjustment referred to in Article R. 351-6 on 1 January 2016, the amount referred to in 1° is calculated using the volatility adjustment applicable on that date.
II - Subject to the prior approval or at the initiative of the Autorité de contrôle prudentiel et de résolution, the amounts of technical provisions, including where applicable the amount of the volatility adjustment, used to calculate the transitional deduction may be recalculated every twenty-four months or more frequently if the risk profile of the undertaking has changed significantly.
III - The Autorité de contrôle prudentiel et de résolution may limit the transitional deduction if its application is likely to result in lower financial resources requirements for the undertaking than those calculated in accordance with the provisions in force on 31 December 2015.
IV - Insurance and reinsurance undertakings applying the transitional deduction:
a) Do not apply Article L. 351-4 ;
b) In the event that they do not comply with the Solvency Capital Requirement without the application of the transitional deduction, submit an annual report to the Autorité de contrôle prudentiel et de résolution setting out the measures taken and the progress made to re-establish at the end of the transitional period defined in I a level of eligible own funds covering the Solvency Capital Requirement or to reduce their risk profile in order to again ensure coverage of the Solvency Capital Requirement;
c) state in the report on their solvency and financial situation referred to in Article L. 355-5 that they are applying the transitional deduction to technical provisions and quantify the impact that the decision not to apply this transitional deduction would have on their financial situation.
V.- Insurance and reinsurance undertakings which, subject to the prior approval of the Autorité de contrôle prudentiel et de résolution, apply the transitional deduction after 1 January 2016, may use the maximum deductible portion referred to in I, which is calculated in the same way as if the transitional deduction had been applied as from 1 January 2016.
VI - The Autorité de contrôle prudentiel et de résolution (ACPR) will decide on the transitional deduction referred to in this article within three months.
