If a third country insurance or re-insurance is considered as not subject to "prudential supervisory and regulation requirements at least equivalent to those applied in the union" (as stated in article 142 (4) ) should we definitely consider this entity as neither "large financial sector entity" neither "unregulated financial sector entity" as defined under article 142 (4) and (5) ? Indeed the definition of "unregulated financial sector entity" ("an entity that is not a regulated financial sector entity but that performs, as its main business, one or more of the activities listed in annex I to directive 2013/36/EU or in annex I to directive 2004/36/EC") does not cover insurance activities.
Article 142(1)(4) defines "large financial sector entities" as, being "subject to prudential regulation in the Union or to the laws of a third country which applies prudential supervisory and regulation requirements at least equivalent to those applied in the union. Insurance and re-insurance companies (including third countries) fall in the perimeter of financial sector entities if they are subject "to prudential regulation in the Union or to the laws of a third country which applies prudential supervisory and regulation requirements at least equivalent to those applied in the union".
Third country insurance/re-insurance companies are eligible for the treatment laid down in Article 153(2) CRR only if they qualify for the definition of large financial sector entity as laid down in Article 142(1)(4) CRR. With regard to the criterion laid down in 142(1)(4)(b) only institutions (i.e. credit institutions and investment firms) established in third countries and territories covered by Annex V of the Commission Implementing Decision No. 2014/908, as amended by the Commission Implementing Decision 2016/2358/EU, can be deemed as fulfilling such criterion. This implies that Insurance and re-insurance undertakings cannot qualify for the application of the AVC scaling factor unless Annex V is amended.
This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Financial Stability, Financial services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.
Update 26.03.2021: This Q&A has not yet been reviewed by the European Commission in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR).