INSPRU 7.1 Application

Principle 4 requires a firm to maintain adequate financial resources. GENPRU 2 deals specifically with the adequacy of the capital resources element of a firm's financial resources.

The adequacy of a firm's capital resources needs to be assessed both by the firm and the FSA. In GENPRU 2.1, the FSA sets minimum capital resources requirements for firms.

The FSA also assesses whether the minimum capital resources requirements are appropriate by reviewing:

1. (1)

   a firm's own assessment of its capital needs; and

2. (2)

   the processes and systems by which that assessment is made.

In assessing whether the minimum capital resources requirements are appropriate, the FSA is principally concerned with capital resources as calculated in accordance with GENPRU 2.2.17 R. However, in carrying out its own assessment of its capital needs, a firm may take into account other capital available to it (see GENPRU 1.2.30 R and GENPRU 1.2.36 R), although it should be able to explain and justify its reliance on these other forms of capital.

There are two main aims in this section:

1. (1)

   to enable firms to understand the issues which the FSA would expect to see assessed and the systems and processes which the FSA would expect to see in operation for ICAs by firms to be regarded as thorough, objective and prudent; and

2. (2)

   to enable firms to understand the FSA's approach to assessing whether the minimum capital resources requirements of GENPRU 2.1 are appropriate and what action may be taken if the FSA concludes that those requirements are not appropriate to a firm's circumstances.

The rules in GENPRU 1.2 require a firm to identify and assess risks to its being able to meet its liabilities as they fall due, to assess how it intends to deal with those risks and to quantify the financial resources it considers necessary to mitigate those risks. To meet these requirements, a firm should consider:

1. (1)

   the extent to which capital is an appropriate mitigant for the risks identified; and

2. (2)

   assess the amount and quality of capital required.

GENPRU 1.2.42 R requires a firm to carry out stress tests and scenario analyses for each of the major sources of risk identified in accordance with GENPRU 1.2.30 R. A firm may also approach the assessment of the adequacy of its capital resourcesin another way. The method should be proportionate to the size and nature of its business.

In accordance with GENPRU 1.2.60 R, these assessments must be documented so that they can be easily reviewed by the FSA as part of the FSA's assessment of the adequacy of the firm's capital resources.

The FSA may ask for the results of these assessments to be provided to it together with a description of the processes by which the assessments have been made, the range of results from each stress test or scenario analysis performed and the main assumptions made. The FSA may also carry out a more detailed examination of the details of the firm's processes and calculations.

Based upon this information and other information available to it, the FSA will consider whether the capital resources requirement applicable to the firm is appropriate. Where relevant, the firm's ECR will be a key input to the FSA's assessment of the adequacy of the firm's capital resources. For firms carrying on general insurance business, the ECR is calculated in accordance with INSPRU 1.1.72C R. For realistic basis life firms, the ECR forms part of the CRR and is calculated in accordance with GENPRU 2.1.38 R.

Firms that are required to calculate an ECR may wish to note that the ECR as calculated is based upon the assumptions that a firm's business is well diversified, well managed with assets matching its liabilities and good controls, and stable with no large, unusual, or high risk transactions. Firms may find it helpful to assess the extent to which their actual business differs from these assumptions and therefore what adjustments it might be reasonable to make to the CRR or ECR to arrive at an adequate level of capital resources.

The ICA should reflect both the firm's desire to fulfil its business objectives and its responsibility to meet liabilities to policyholders. This means that the ICA should demonstrate that the firm holds sufficient capital to be able to make planned investments and take on new business (within an appropriate planning horizon). It should also ensure that if the firm had to close to new business (if it has not already done so), it would be able to meet its existing commitments. The costs of writing new business, the expenses incurred in servicing all liabilities, including liabilities to non-policyholders, and the nature of intra-group arrangements and reinsurance arrangements should be considered as part of the assessment as well as the costs that would be incurred in the event of closure to new business.

Where a firm has not already closed to new business, the ICA should be made on the basis that the firm closes to new business after an appropriate period. This period should allow for the time it would take for the firm to identify the need for closure and to implement the necessary action.

Where including new business would increase the capital resources by more than any increase in the capital required, or reduce the capital required by more than any reduction in available capital, new business should be excluded. To the extent that including new business increases the required capital, a firm should consider whether it is appropriate to include the additional amount within the ICA.

Any contract that the firm is legally obliged to renew should be considered part of the firm's existing liabilities and not treated as new business. Such contractual obligations include multi-year general insurance contracts and the exercise of options by long-term policyholders.

For a firm to discharge its financial obligations to policyholders, it will incur certain expenses, including payments to the firm's own staff, contributions to any pension scheme and fees to outsourcing suppliers or service companies. All of these expenses, and risks associated with these payments, should be considered when carrying out the ICA. When considering the appropriate level of expenses in a projection, the firm should consider the acceptability of the service provided to policyholders and the resources required by the senior management to manage the firm.

Where a firm's liabilities include payments which are subordinated to liabilities to policyholders, these payments do not need to be included within the ICA. However, the ICA should include all payments that must be made to avoid putting policyholders' interests at risk, including any payment on which a default might trigger the winding up of the firm. For example, if the principal of a loan could be recalled on default of a coupon payment, coupon payments over the lifetime of policyholder liabilities should be included in the ICA. As a further example, declared dividends should be treated as a liability. However, planned dividends that have not been declared need not be included in the ICA.

It is common for firms whose corporate group consists of a number of separate legal entities to have intra-group transactions in place. Capital and risk may originate within the firm and be passed to another company or may originate in another company and be passed to the firm. The ICA should consider the underlying effect of intra-group arrangements.

Risks may exist within the individual legal entity from these intra-group transactions. Intra-group transactions should not be treated differently from external transactions just because they are intra-group. However, some intra-group transactions may carry less credit risk than the equivalent external transactions if the firm has access to more information regarding the financial position of an internal reinsurer. In assessing intra-group risks, consideration should be given, but should not be limited, to:

1. (1)

   future defaults on intra-group reinsurance arrangements: Firms should consider, for example, a test akin to the credit risk assessment undertaken on external reinsurance assets held or future anticipated recoveries; in other cases it may be more appropriate to perform a more explicit assessment of the group counterparty's own capital position, to inform the firm's exposure to default;

2. (2)

   non-recoverability on intra-group loans: Even though these transactions occur within the same group, there is a risk that an entity may default on such intra-group payments; and

3. (3)

   non-payment of future internal dividends or transfers: Many entities or funds within a group rely on these payments as a means to maintaining their solvency position. There is a risk that the entity paying the dividend or making the transfer may not be able to do so, and ICAs performed for separate regulated legal entities or funds within a group should consider these risks as appropriate.

A firm's capital should normally be restricted to resources within the firm. Where the firm is relying on resources outside the direct control of the firm, these should only be included to the extent that the firm has a right to call on those resources and the provider has the ability to provide those resources without recourse to the assets of the firm itself, in the circumstances considered as part of the ICA.

The ICA should reflect the firm's ability to react to events as they occur. When relying on prospective management actions, firms should understand the implications of taking such actions, including the financial effect, and taking into consideration any preconditions that might affect the value of management actions as risk mitigants.

The ICA should assume that a firm will continue to manage its business having regard to the FSA's Principles for Businesses. In particular, a firm should take into account how the FSA's Principles for Businesses may constrain its prospective management actions, for example, Principle 6 (Treating Customers Fairly).

Firms should also consider whether their systems and controls provide sufficient information to permit senior management to identify the crystallisation of risks in a timely manner so as to provide them with the opportunity to respond and allow the firm to obtain the full value of the modelled management action. Firms should also analyse the wider implications of the management actions, particularly where they represent significant divergence from the business plan and use this information to consider the appropriateness of taking this action.

Where the ICA assumes that the firm may move capital from one part of its business to another across legal or geographical boundaries, the firm should explain the mechanisms that it would apply and satisfy itself that it could achieve the necessary capital movements in times of distress (see GENPRU 1.2.51 R). The firm should also consider any associated costs or restrictions in the amount of capital that would be able to be relocated.

The ICA should give the required level of confidence that the firm's liabilities to policyholders will be paid. The ICA should consider all material risks which may arise before the policyholder liabilities are paid (including those risks set out in GENPRU 1.2.30 R).

Firms should not ignore risks simply because they relate to events that occur with an expected likelihood beyond the confidence level. However, the capital required in the face of these tail events may be reduced for the purpose of carrying out the ICA. For example, while an A-rated bond may be assumed not to default within the required confidence level, allowance should be made for the devaluation of that bond through a more likely downgrade or change in credit spreads or other method which reflects that this investment includes a default risk to the firm.

Notwithstanding INSPRU 7.1.30 G, risks which have an immaterial effect on the firm's financial position or only occur with an extreme probability may be excluded from the ICA.

The number of claims, the amount paid and the timing of a firm's liabilities may be uncertain. The ICA should consider risks which result in a change in the cost of those liabilities.

The assets that a firm holds will include assets to back both the liabilities and any capital requirement. These assets carry risk, both in their own right and to the extent that they do not match the liabilities that they are backing. The risk associated with these assets should be considered over the full term for which the firm expects to carry the liabilities.

Where the firm is relying on systems and controls in order to mitigate risks, the firm should consider the risk of those systems and controls failing at the confidence level at which the ICA is being carried out.

If a firm summarises cash flows over part of the lifetime of the portfolio using a balance sheet but is exposed to risks which emerge after the balance sheet date, then these longer-dated risks may be captured by adjusting the assumptions used in the closing balance sheet.

The valuation of the assets and of the liabilities should reflect their economic substance. A realistic valuation basis should be used for assets and liabilities taking into account the actual amounts and timings of cash flows under any projections used in the assessment.

In carrying out the ICA, wherever possible the value of assets should be marked to market. Where marking to market is not possible, the ICA should use a method suitable for assessing the underlying economic benefit of holding each asset.

The methods and assumptions used in valuing the liabilities should contain no explicit margins for risk, nor should the approach be optimistic. The valuation of liabilities should be consistent with the valuation of assets. To the extent the market price includes an implicit allowance for risk, this should be included within the valuation.

The methodology used to place a value on an asset or a liability following a risk event should be consistent with the methodology used prior to the risk event.

Approximate valuation methods may be used by the firm for minor lines of business or to capture less material types of risk. However, the firm should avoid methods which under-estimate the risk in aggregate.

The firm should carry out a broad reconciliation of key parts of any balance sheet used in the ICA with the corresponding entry from audited results.

In considering the value of liabilities for the purpose of INSPRU 7.1.42 R, firms should have regard to the guidance in INSPRU 7.1.21 G, INSPRU 7.1.26 G and GENPRU 1.2.27 G to GENPRU 1.2.29 G.

The FSA requires firms to submit a capital assessment calibrated to a common confidence level, as set out in INSPRU 7.1.42 R, to enable the FSA to assess whether the minimum capital resources requirements in GENPRU 2.1 are appropriate. This then allows the FSA to give a consistent level of individual capital guidance across the industry.

If a firm selects a longer time horizon than one year it may choose to use a lower confidence level than 99.5%. In such a case, the firm should be prepared to justify its choice and explain why this confidence interval is appropriate and how it is comparable to a 99.5% confidence level over a one year timeframe. An assessment based on a longer timeframe should also demonstrate that there are sufficient assets to cover liabilities at all future dates. This may be illustrated by future annual balance sheets.

In determining the strength of the ICA, a firm should consider all risks in aggregate making appropriate allowance for diversification such that the assessment meets the required confidence level overall. The firm should be able to describe and explain each of the main diversification benefits allowed for.

For risks that can be observed to crystallise over a short period of the order of a year, the confidence level may be measured with reference to the probability distribution for the impact of the risks over one year. For example, catastrophic events such as hurricanes can be measured in this way by estimating the ultimate capital cost.

For risks that are not observable over a short period (such as long-tailed liability business or annuitant mortality), the confidence level may be measured with reference to the probability distribution for the emergence of that risk over the lifetime of the liabilities.

A firm's management should determine their own risk appetite or confidence level and a risk measure that they believe is suitable for the management of the business. The FSA expects that the firm's capital resources assessment under GENPRU 1.2 which it uses in the management of its business may well be at a different confidence level than the 99.5% one required by INSPRU 7.1.42 R for a number of reasons, for example, because its view of capital adequacy is different, or to satisfy the demands of rating agencies, or to meet the proposition to policyholders as to the strength of the firm. A firm will maintain its own written assessment of the adequacy of its financial resources, as required by GENPRU 1.2, through the written record requirement of GENPRU 1.2.60 R.

INSPRU 7.1.49R (2) recognises that a firm may carry out a number of different assessments of the adequacy of its capital resources, using different confidence levels, in reaching its overall assessment of the adequacy of its financial resources under GENPRU 1.2. The purpose of asking the firm to identify the major differences between those assessments and the assessment documented under INSPRU 7.1.49R (1) is to enable the FSA better to understand the firm's approach to capital adequacy and risk management in running its business. Understanding the written record made under GENPRU 1.2.60 R is therefore key to the FSA's understanding of the firm's risk and capital management processes.

The written record of any other assessment by the firm required by GENPRU 1.2.60 R is not itself part of the submission to the FSA, but the FSA is interested in the connection between that other assessment, as documented in the written record required by GENPRU 1.2.60 R, and the assessment documented under INSPRU 7.1.49R (1) in terms of the firm's compliance with GENPRU 1.2, and the use of capital measures within the firm.

For the purpose of the written record submitted to the FSA, the submitted comparison should include:

1. (1)

   A description of any direct difference in the strength of the firm's own assessment compared to the assessment submitted to theFSA. This is likely to be expressed as a different confidence level to the assessment undertaken to a 99.5% confidence level or the targeting of a defined margin about the 99.5% assessment.

2. (2)

   A description of any major differences in the definition of the assets or liabilities, the management actions used, the risks considered or the valuation methodology and assumptions included within the assessment.

Some firms may not undertake an assessment at a separate confidence level because they consider that a 99.5% confidence level is appropriate to manage their business and meets the requirements of GENPRU 1.2. In the case of these firms, no analysis of the major differences is required to be submitted.

Firms should provide evidence to support the choice of assumptions used within the ICA.

Where the choice of assumptions is supported by data, the firm should consider the relevance of that data to the firm's current and future circumstances and the robustness of any estimates derived.

Where the choice of assumptions is supported by expert judgement, the firm should consider the nature and value of the expertise being used to support this judgement and any biases that may exist. Where possible, the firm should use data to test and support these expert judgements.

Firms should be able to demonstrate how they have identified the most financially significant assumptions and calculate the sensitivity of the ICA to changes in these assumptions. The choice of assumption may be decided using the results of sensitivity testing.

Firms may seek to justify their assumptions by considering the process used to determine those assumptions from relevant data. Alternatively, where historical data is either limited or not considered to be indicative of likely future experience, firms may justify their assumptions by reference to the suitability of the calibration for the purpose of the ICA. However, relatively more attention should be given to the justification where the choice of assumption has a more significant effect on the ICA.

Where there is a concentration of business from a single source (for example, a single sales channel or cedant), consideration should be given to the greater impact of a risk crystallising, compared to that for a well-diversified portfolio.

Where projection of the value of assets and liabilities reflects the firm's prospective management actions, the firm should justify the choice of prospective management actions and the assumptions used.

Where the prospective management action is identical to those used in another regulatory assessment of solvency (e.g. calculation of the WPICC for realistic basis life firms), no further justification is required.

Where the prospective management action is not similar to those used in another regulatory assessment of solvency, or uses different assumptions, the firm should show the financial impact of the management action.

Firms should regularly review key parameters, both to ensure their continued applicability and to reduce uncertainty over the current level of capital required. Firms using assumptions that are very different from past experience should present robust arguments in support of the differences.

The methodology used within the ICA should allow the firm to quantify the financial effect of material risks at the required confidence level. The methodology used should also reflect the nature of the firm's business and be consistent with the way in which the firm identifies and manages risk.

Firms should be able to explain their rationale for choosing their approach to risk and assessment of capital required. There are no simple classifications of approach to risk and capital assessment, so the rationale should be considered in the context of a number of defining characteristics in the structure of the capital model.

Generally, larger firms would be expected to take a more sophisticated approach to capital modelling than smaller ones.

A firm may choose to carry out the assessment of the adequacy of capital resources through the use of stress testing and scenario analysis (noting that GENPRU 1.2.42 R requires stress tests and scenario analyses to be undertaken to determine the overall financial adequacy of a firm's financial resources). Where used, such testing should reflect the potential range of outcomes for the risks being quantified, consistent with the prescribed confidence level for the ICA.

The overall assessment of capital required may require the aggregation of results from the stress and scenario testing. The firm should explain its choice of aggregation approach and its understanding of the implications of combining the individual risks. The firm should be satisfied that the resultant capital provides the required degree of confidence, given the variability of the underlying risks and the uncertainty associated with modelling those risks. A useful component of this process is the characterisation and explanation of a range of possible circumstances that could give rise to a loss of this magnitude.

The conclusion of the ICA should consider whether the firm has adequate capital to meet its assessment of the required capital. Furthermore, the firm should consider any implications for its approach to risk management arising from the work carried out. The ICA should be supported by an explanation of the material sources of risk and financial impact of the management actions that the firm may take to manage those risks. Where possible, the reasonableness of the results should be supported by considering other evidence of the capital needed.

The objective of capital modelling is to consider all possible outcomes, however unlikely any one outcome might be, and set capital as protection against all but the most extreme losses. It is therefore important to focus not only on the assumptions and methodology used to quantify individual risks, but also on the approach to aggregating the capital required for each risk.

However the risks have been aggregated to give the firm's capital requirement, checks should be made as to the reasonableness of the outcome. It should be possible to characterise scenarios, or combinations of loss events, that would result in a loss of similar magnitude to that indicated by the ICA. Firms should consider a range of scenarios that could give rise to such a loss.

The results of the ICA should be supplemented by analysis of the sources of the risks to which the firm is exposed, discussion of the events which are most likely to threaten the financial stability of the firm and the potential mitigating actions which are available to senior management.

Responsibility for:

1. (1)

   managing the risks associated with the insurance business; and

2. (2)

   holding the capital resources that support those risks;

is divided between managing agents and the Society. To clarify the respective responsibilities of managing agents and the Society for ensuring the adequacy of financial resources, the FSA distinguishes between the managing agents' responsibility to carry out capital adequacy assessments of the capital resources held at syndicate level for each syndicate that they manage, and the Society's responsibility to carry out an assessment for each member.

In assessing the adequacy of the capital resources supporting the insurance business of each member, the Society should consider the risks, controls and financial resources relevant to the totality of the member's insurance business, including:

1. (1)

   the adequacy of syndicate ICAs;

2. (2)

   the member's share of syndicate ICAs;

3. (3)

   adjustments in respect of risks and controls relating to funds at Lloyd's, central assets and the interaction of risks underwritten by the member through different syndicates and in respect of different syndicate years; and

4. (4)

   the ongoing validity of any relevant assumptions it makes.

In taking account of a syndicate ICA under INSPRU 7.1.77 R:

1. (1)

   if the Society considers a syndicate ICA to be adequate, it should use the managing agent's risk and capital assessments in carrying out its ICA in relation to any member of that syndicate, or it should be able to justify why it will not; and

2. (2)

   if the Society considers a syndicate ICA to be less than adequate, the Society should increase the syndicate ICA so that it is adequate for the purpose of carrying out its ICA in relation to the members of that syndicate.

The assessment of capital adequacy for a member will rarely equal the proportionate share of a syndicate ICA (or sum of those shares, where the member participates on more than one syndicate) as attributed to that member, because, in determining the capital assessments for each member, the Society may make adjustments to take account of:

1. (1)

   risks and controls associated with funds at Lloyd's and central assets, which can increase the assessment for that member;

2. (2)

   diversification effects, including as a result of members' participations on more than one syndicate year, which can reduce the assessment for that member; and

3. (3)

   its own assessment of syndicate risks, which can be higher than the managing agent's and so increase the assessment for that member.

Capital resources to meet each syndicate ICA could be:

1. (1)

   held within a syndicate and managed by the managing agent; or

2. (2)

   held and managed by the Society; or

3. (3)

   not needed in full, because of effects such as diversification that the Society takes into account.

The balancing amount is a function of the relationship between the syndicate ICA and the amount of assets held within the syndicate. As illustrations:

1. (1)

   if the syndicate holds no capital resources (but its liabilities are fully covered by relevant assets), the balancing amount equals the syndicate ICA (as there are no capital resources at syndicate level, all the capital resources must be held as funds at Lloyd's or central assets);

2. (2)

   if capital resources held at syndicate level are negative (i.e. if relevant assets do not fully cover liabilities for the syndicate), the balancing amount should be higher than the syndicate ICA by an amount corresponding to the negative capital resources held by managing agents on behalf of the syndicate; and

3. (3)

   conversely, if a syndicate holds positive capital resources for the syndicate, the balancing amount should be lower than the syndicate ICA by a corresponding amount.

Managing agents should submit syndicate ICAs and notify balancing amounts to the Society as part of the annual capital-setting process at Lloyd's. The submission of the syndicate ICA and the notification of the balancing amount should be made in good time for the Society to review them and place appropriate reliance on them when it determines the capital assessments for each member.

When communicating the syndicate ICA and balancing amount for each syndicate to the Society, managing agents should agree with the Society an allocation of the syndicate ICA between syndicate years. The purpose of the allocation is to ensure that there is an appropriate matching of assets to risk and liabilities and an equitable treatment between the members reflecting the provision of capital in each syndicate year.

For the purposes of complying with their obligations under INSPRU, managing agents may assume that any balancing amount confirmed by the Society under INSPRU 7.1.85 R is supported by capital resources held as funds at Lloyd's and central assets.

In assessing the adequacy of a firm's capital resources, the FSA draws on more than just a review of the submitted ICA. Use is made of wider supervisory knowledge of a firm and of wider market developments and practices. When forming a view of any individual capital guidance to be given to a firm, the review of the firm's ICA along with the ARROW risk assessment and any other issues arising from day-to-day supervision will be considered.

The FSA will take a risk-based and proportionate approach to the review of a firm's ICA, focusing on the firm's approach to dealing with the key risks it faces. Any individual capital guidance given will reflect the judgements reached through the ARROW review process as well as the review of the firm's ICA.

A firm should not expect the FSA to accept as adequate any particular model that the firm develops or that the results from the model are automatically reflected in any individual capital guidance given to the firm for the purpose of determining adequate capital resources. However, the FSA will take into account the results of any sound and prudent model when giving individual capital guidance or considering applications for a waiver under section 148 of the Act of the capital resources requirement in GENPRU 2.1.

Where the FSA considers that a firm will not comply with GENPRU 1.2.26 R (adequate financial resources, including capital resources) by holding the capital resources required by GENPRU 2.1, the FSA may give the firm individual capital guidance advising it of the amount and quality of capital resources which the FSA considers it needs to hold in order to meet that rule.

In giving individual capital guidance, the FSA seeks a balance between delivering consistent outcomes across the individual capital guidance it gives to all firms and recognising that such guidance should reflect the individual features of the firm. Comparison with the assumptions used by other firms will be used to trigger further enquiry. Debate will be sought where good arguments are made for a particular result that differs markedly from those of a firm's peers. The FSA also takes account of the quality of the wider risk management around the development of the numbers used in the ICA. The aim is to deliver individual capital guidance that comes closest to ensuring that there is no significant risk that a firm is unable to pay its liabilities as they fall due.

Following an internal validation process, the FSA will write to the Board of the firm being assessed providing both quantitative and qualitative feedback on the results of the FSA's assessment. This letter will notify the firm of the individual capital guidance considered appropriate. The letter will include reasons for any capital add-ons identified, where applicable.

If a firm considers that the individual capital guidance is inappropriate to its circumstances, then the firm should inform the FSA that it does not intend to follow that guidance. Informing the FSA of such an intention would be expected if a firm is to comply with Principle 11 (Relations with regulators).

The FSA expects most disagreements about the adequacy of capital will be resolved through further analysis and discussion. The FSA may consider the use of its powers under section 166 of the Act (Reports by skilled persons) to assist in such circumstances. If the FSA and the firm still do not agree on an adequate level of capital, then the FSA may consider using its powers under section 45 of the Act to, on its own initiative, vary a firm's Part IV permission so as to require it to hold capital in accordance with the FSA's view of the capital necessary to comply with GENPRU 1.2.26 R. SUP 7 provides further information about the FSA's powers under section 45.

Where a firm considers that the capital resources requirements of GENPRU 2.1 require the holding of more capital than is needed for the firm to comply with GENPRU 1.2.26 R then the firm may apply to the FSA for a waiver of the requirements in GENPRU 2.1 under section 148 of the Act. In addition to the statutory tests under section 148, in deciding whether to grant a waiver and, if granted, its terms, the FSA will consider the thoroughness, objectivity and prudence of a firm's ICA and the extent to which the guidance in this section has been followed. TheFSA will not grant a waiver that would cause a breach of the minimum capital requirements under the Insurance Directives or Reinsurance Directive.1