The parent is an insurance company which has a 100% participation in a bank which in turn has a 100% participation in a securities firm.

Insurance Company A1 (Parent)

Assets		Liabilities
Investments	5,000	Capital	1,000
Book value participations in: Bank B1		General reserves	500
	500	Technical provisions	4,000
Total	5,500	Total	5,500
Solvency requirement	800

Bank B1 (Dependant)

Assets		Liabilities
Loans	8,750	Capital	500
Book value participations in: Securities C1		General reserves	400
	250	Other liabilities	8,100
Total	9,000	Total	9,000
Solvency requirement	800

Securities Firm B2 (Dependant)

Assets		Liabilities
Investments	4,000	Capital	250
		Reserves	250
		Other liabilities	3,500
Total	4,000	Total	4,000
Solvency requirement	400

Without provisions to account for this corporate structure in measures of capital adequacy, it appears that solo capital requirements for the individual entities in this group are met. However, it is clear that a portion of the capital of the parent insurance company, i.e. the amount of 500 invested in bank B1 is levered twice, once in the parent and again in bank B1(double gearing). Furthermore, the amount invested by B1 in the securities firm B2 (250) which has already been levered twice is now being levered a third time, in the securities firm (when capital is being levered more than twice, it is said to be an instance of multiple gearing).

On the face of it, the group has total capital and reserves of 2,900 to cover total solvency requirements of 2,000. If the multiple gearing is eliminated the adjusted capital and reserves reduce to 2,150 leaving a surplus of only 150 over the capital requirements of 2,000. All three techniques should yield these results.