Prudential Regulation Authority Rulebook

17.1

This Chapter only applies to an incorporated friendly society.

17.2

Subject to 17.2 to 17.6, the aggregate value of the assets of a firm must be reduced by an amount representing the aggregate of:

1. (1) the amount by which the firm is exposed to assets of any description in excess of the permitted asset exposure limit for assets of that description;
2. (2) the amount by which the firm is exposed to a counterparty in excess of the permitted counterparty exposure limit for such counterparty;
3. (3) the amount by which the firm has an excess concentration with a number of counterparties;
4. (4) the value of any assets transferred to or for the benefit of the firm in pursuance of a condition in a derivative or a related contract; and
5. (5) the value of any assets transferred to or for the benefit of the firm in pursuance of a contract whose effect is that of a derivative or a related contract,

as determined in accordance with 18 to 29.

17.3

Where a firm is exposed to assets of any description in excess of the permitted asset exposure limit for such assets, the reduction required to be made by 17.2(1) must be made:

1. (1) by deducting (as far as possible) the amount of the excess from the assets of that description held by the firm; and
2. (2) where the firm does not hold sufficient (or any) assets of that description to eliminate the excess, by making an appropriate deduction from the aggregate value of the assets which the firm would otherwise be permitted to take into account for any of the purposes of this Part.

17.4

Where a firm is required to make a reduction in accordance with 17.2(2), (3), (4) or (5), the reduction must be made by making a deduction from the aggregate value of the assets which the firm would otherwise be permitted to take into account for any of the purposes of this Part.

17.5

Where a firm carrying on long-term insurance business has attributed assets partly to a long-term insurance business fund and partly to its other assets, any reduction required to be made by this rule must be made in the same proportion as the attribution.

17.6

Assets of a firm comprising:

1. (1) approved securities or any interest accrued thereon;
2. (2) debts to which 9.4 applies;
3. (3) rights to which 9.5 applies;
4. (4) debts in respect of premiums;
5. (5) moneys due from, or guaranteed by, the government of any approved State;
6. (6) shares in or debts due or to become due from a dependant falling within 5;
7. (7) holdings in a scheme falling within the UCITS Directive; or
8. (8) deferred acquisition costs,

must not be taken into account in any of the calculations described in 17.2.

17.7

Assets of dependants of the firm that are debts due or to become due from the firm or from a dependant of the firm must not be taken into account in any of the calculations described in 17.2.

17.8

Where a firm has entered into any contracts providing for the payment of index-linked benefits, the provisions of 17.2(1) must not apply to assets of that firm to the extent that they are held to match liabilities in respect of such benefits.