1.For the purposes of Article 171a(1), point (a), the insurance or reinsurance undertaking shall be able to demonstrate to the satisfaction of the supervisory authority that it complies with either of the following conditions:
a sufficient amount of particular homogeneous risk groups of the life insurance and reinsurance liabilities, whose Macaulay duration exceeds 9,5 years, are illiquid within the meaning of paragraph 2; or
a sufficient liquidity buffer is in place for non-life insurance and reinsurance obligations, calculated in accordance with paragraphs 3 to 5.
2.The condition referred to in paragraph 1, point (a) shall be deemed fulfilled where the insurance and reinsurance undertaking complies with both of the following conditions:
the value in accordance with Article 75 of Directive 2009/138/EC of illiquid liabilities referred to in paragraph 1, point (a) exceeds the total amount of long-term equity investments within the portfolio of assets related to life insurance or reinsurance obligations;
the share of equity investments to which Article 105a(4) of Directive 2009/138/EC is intended to be applied does not exceed the higher of zero and the ratio of the value in accordance with Article 75 of Directive 2009/138/EC of illiquid liabilities referred to in point (a) of this paragraph to the total best estimate of life technical provisions of the insurance or reinsurance undertaking.
For the purposes of the first subparagraph, a homogenous risk group of life insurance and reinsurance liabilities shall be considered illiquid where the capital requirement for each of the following risks is lower than 5 % of the best estimate of the liabilities belonging to that homogenous risk group:
the mortality risk referred to in Article 137;
the risk of a permanent increase in lapse rates referred to in Article 142(1), point (a);
the health mortality risk referred to in Article 152;
the risk of a permanent increase in SLT health lapse rates referred to in Article 159(1), point (a).
3.The condition referred to in paragraph 1, point (b) shall be deemed fulfilled where the liquidity buffer calculated in accordance with paragraphs 4 to 6 is higher than 100 %.
For the purposes of the first subparagraph, the liquidity buffer shall be calculated as the ratio of the value of the portfolio of liquid assets corresponding to non-life insurance activities to the best estimate of non-life technical provisions net of reinsurance, calculated in accordance with paragraphs 4 and 5.
4.For the purposes of paragraph 3, the portfolio of liquid assets corresponding to non-life insurance activities shall include Level 1 assets, Level 2A assets and Level 2B assets, within the meaning of this paragraph.
The sum of the values for solvency purposes of Level 2A and Level 2B assets shall not exceed 40 % of the total value for solvency purposes of the portfolio of liquid assets referred to in the first subparagraph. The value for solvency purposes of Level 2B assets shall not exceed 15 % of the total value for solvency purposes of the portfolio of liquid assets referred to in the first subparagraph.
Liquid assets held through collective investment undertakings and through other investments packaged as funds in which insurance or reinsurance undertakings hold units or shares, may be taken into account up to an absolute amount of EUR 500 million.
Level 1 assets shall only include assets falling under one or more of the following categories:
cash and cash equivalents;
assets representing claims on one of the counterparties referred to in Article 180(2);
assets that are fully, unconditionally and irrevocably guaranteed by one of the counterparties referred to in Article 180(2), where the guarantee meets the requirements set out in Article 215.
Level 2A assets shall only include assets falling under one or more of the following categories:
bonds and loans which have been assigned to credit quality step 0 or 1, excluding bonds and loans issued by insurance and reinsurance undertakings or financial sector entities within the meaning of Article 4, point (27) of Regulation (EU) No 575/2013;
covered bonds referred to in Article 180(1) which have been assigned to credit quality step 0 or 1, excluding those which are issued by a financial sector entity which is part of the same group.
Level 2B assets shall only include assets falling under one or more of the following categories:
STS securitisation which either has been assigned a credit assessment of credit quality step 0 or 1 by a nominated ECAI, or which is a senior tranche, and which is not originated by entities belonging to the same group as the insurance or reinsurance undertaking;
bonds and loans which have been assigned to credit quality step 2 or 3, excluding bonds and loans issued by insurance and reinsurance undertakings or financial sector entities within the meaning of Article 4, point (27) of Regulation (EU) No 575/2013;
investments in equities, other than long-term equity investments or strategic equities, and other than investments in insurance and reinsurance undertakings, credit or financial institutions and investment firms, which are either listed in regulated markets in the countries which are members of the EEA or the OECD, or traded on multilateral trading facilities, as defined in Article 4(1), point (22), of Directive 2014/65/EU, whose registered office or head office is in a Member State of the European Union.
5.For the purposes of calculating the liquidity buffer referred to in paragraph 3, first subparagraph, the following shall apply:
the value of the portfolio of liquid assets referred to in paragraph 4, first subparagraph, shall be the sum of the following:
the value for solvency purposes of Level 1 assets, subject to a haircut of 0 %;
the value for solvency purposes of Level 2A assets, subject to a haircut of 15 %;
the value for solvency purposes of securitisations which fall under Level 2B assets, subject to a haircut of 25 %;
the value for solvency purposes of Level 2B assets other than securitisations, subject to a haircut of 50 %;
for the purposes of calculating the best estimate of non-life technical provisions referred to in paragraph 4, cash flows stemming from reinsurance contracts or special purpose vehicles that meet the requirements set out in Articles 209, 211 and 213 shall be subject to a haircut of 15%. Cash flows stemming from reinsurance contracts or special purpose vehicles that do not meet the requirements set out in Article 209, 211 and 213 shall be subject to a haircut of 50 %.
6.By way of derogation from paragraph 5, point (a), insurance and reinsurance undertakings shall apply the following haircuts to their investments in liquid assets held through collective investment undertakings and through other investments packaged as funds in which undertakings hold units or shares:
0 % for cash and cash equivalents;
5 % for Level 1 assets other than cash and cash equivalents;
20 % for Level 2A assets;
30 % for securitisations which fall under Level 2B assets;
55 % for Level 2B assets other than securitisations.