Solvency II: the quality of capital instruments

Supervisory Statement 3/15

Update 30 September 2019

This SS was updated following publication of Policy Statement 21/19 ‘Responses to CP13/19 Occasional Consultation Paper’.

Published on 20 March 2015

This supervisory statement is of interest to all UK Solvency II firms, the Society of Lloyd’s and firms that are part of a Solvency II group that will determine and classify capital instruments under the Solvency II own funds regime. This statement should be read alongside all relevant European legislation and relevant parts of the Prudential Regulation Authority Rulebook.

SS3/15 covers the following topics:
  • prohibition on redemption of instruments within five years of the date of issue;
  • liability management and capital reduction;
  • principal loss-absorbency mechanism for Tier 1 instruments subject to limitation (‘restricted Tier 1’); and
  • additional considerations for instruments intended to contribute to group own funds.

Current version

Published: 30 September 2019

Past versions

Published: 20 February 2019


Published: 20 March 2015

  • Update 20 June 2019

    On Monday 8 July 2019 certain changes to the Solvency II Commission Delegating Regulation (CDR) will come into effect. At that point both Chapter 2 of Supervisory Statement (SS) 3/15 (prohibition on redemption of instruments within five years of the date of issue), and the expectation in paragraph 4.4 of SS3/15 (that the conversion or write down of restricted Tier 1 instruments would need to apply to the total amount), will no longer be consistent with the applicable Solvency II regime.

    The PRA is consulting on changes to SS3/15 to realign it with the Solvency II regime in Chapter 2 of CP13/19 ‘Occasional Consultation Paper’. Until the final policy for CP13/19 is published, firms should refer to the Official Journal for changes to the CDR text.

    Apart from the specific content noted above, the PRA expects firms to continue meeting the expectations of SS3/15 in full.

    Update 20 February 2019

    This SS was updated following publication of Policy Statement 4/19 ‘Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on write down’. The new policy will come into effect for all instruments issued on or after Thursday 21 February 2019.

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