LINEA BASE AMBIENTAL

Article 105

In order to establish whether the provisions with regard to risk management are complied with, an insurance undertaking’s capital (hereinafter referred to as: the capital) shall be calculated in accordance with the methodology stipulated in the following articles of this Section.

Core Capital

Article 106

(1) In calculating the core capital of an insurance undertaking, account shall be taken of the following items:

1. paid-up share capital of a public limited company, except on the basis of cumulative preferred shares paid-up share capital or the initial capital and assets in the accounts of members of a mutual insurance company;

2. capital reserves, except for capital reserves linked to cumulative preferred shares; 3. reserves from profits, except reserves for treasury shares and own holdings; 4. net profit brought forward from previous years;

5. surplus on revaluation of assets which are not financed from technical provisions. (2) In calculating core capital, account shall be taken of the following items as deductions: 1. own shares and own holdings;

2. intangible long-term assets;

3. net losses brought forward from previous years and losses of the current year; 4. difference between undiscounted and discounted reserves for outstanding claims.

(3) Notwithstanding the provisions of item 4 of the preceding Paragraph of this Article, the difference between undiscounted and discounted reserves for outstanding claims shall not be

taken into account as a deduction item for insurance risks from clauses 1 and 2 of Paragraph (2) of Article 2 of this Act or for reserves from annuities in other insurance classes.

(4) The core capital must always be equal to at least the guarantee capital referred to in Article 112 of this Act.

Additional capital

Article 107

(1) In calculating the additional capital of an insurance undertaking, account shall be taken of the following items:

1. paid-up share capital on the basis of cumulative preferred shares; 2. capital reserves linked to cumulative preferred shares;

3. subordinated debt instruments;

4. equalisation provisions formed by insurance undertakings at their own judgement; 5. other items.

(2) In the calculation of additional capital, the items of the preceding Paragraph of this Article shall be taken into account only up to the extent laid down by the rule referred to in Article 109 of this Act, with reference to either the capital of the insurance undertaking referred to in Article 106 of this Act or the solvency margin of the insurance undertaking referred to in Articles 110 and 111 of this Act, whichever is lower. Upon a substantiated application by the insurance undertaking, and with the approval of the Insurance Supervision Agency, the following items shall belong among other items referred to in item 5 of the preceding Paragraph:

– the value of mathematical provisions calculated by excluding or taking into account a part of the acquisition costs included in the premium, and reduced by the mathematical provision calculated by taking into account the acquisition costs included in the premium. The

calculation of the mathematical provision may not take into account the acquisition costs exceeding 3.5% of the sum insured. In calculating the differences of mathematical provisions, negative values shall be set to zero;

– half of the unpaid called-up share capital of a public limited company, or of the initial capital of a mutual company.

(3) Subordinated debt instruments shall be securities and other financial instruments from which the holder has, in the event of bankruptcy or liquidation of the issuer, the right to payment only after the payment of other creditors of the issuer, or which with regard to maturity and other properties are suitable for a coverage of potential losses due to risks to which the insurance undertaking is exposed in its business.

Calculation of capital

Article 108

(1) In calculating the insurance undertaking’s capital, the sum of core capital and additional capital shall be reduced by the following items:

1. participation in other insurance undertakings, reinsurance undertakings, insurance holding companies, banks, stock broking companies, management companies and other financial

institutions, insofar as in accordance with regulations they calculate capital adequacy in which the insurance undertaking participates in accordance with Paragraph (1) of Article 9 of this Act;

2. investments in subordinated debt instruments and other investments in entities referred to in the previous clause that are taken into account in determining the capital adequacy of such entities in the calculation of their capital and in which the insurance undertaking participates in accordance with Paragraph (1) of Article 9 of this Act;

3. illiquid assets.

(2) Illiquid assets shall be the insurance undertaking’s investments in the shares of the Stock Exchange, the Clearing and Depository Corporation, claims arising from payments in the guarantee fund kept by the Clearing and Depository Corporation, claims arising from payments in other funds intended for mutual guarantee in meeting the obligations of several entities, and other assets which cannot be turned into money within the period needed to satisfy debts due in time.

Risk management regulations

Article 109

The Insurance Supervision Agency shall lay down detailed risk management rules to determine:

1. the method and extent of considering individual items in calculating the insurance undertaking’s capital and its capital adequacy;

2. detailed features and types of items to be taken into account in calculating the insurance undertaking’s capital and its capital adequacy;

3. detailed features of both the subordinated debt instruments referred to in Paragraph (3) of Article 107 of this Act and the illiquid assets referred to in Paragraph (2) of Article 108 of this Act and assets in accounts of members of a mutual insurance company referred to in Article 44(a) of this Act;

4. detailed rules relating to the calculation of the insurance undertaking’s minimum capital referred to in Articles 110, 111 and 139 of this Act;

5. detailed rules and minimum standards, and possibly also the methodology, for the calculation of technical provisions;

6. detailed types and features of assets covering technical provisions and assets of funds covering mathematical provisions, and detailed rules relating to the spreading and limiting of those investments, and their valuation and balancing;

7. guidelines for the calculation of own holdings of the insurance undertaking in the tables of maximum coverage, and guidelines for establishing the maximum probable loss;

8. the detailed method of calculating liquidity ratios and the minimum liquidity which the insurance undertaking is obliged to provide;

9. the detailed contents of the reports referred to in Article 140 of this Act, as well as deadlines and methods of reporting.