Prudential Regulation Authority Rulebook

1.1

Unless otherwise stated, this Part applies to a non-directive insurer other than a non-directive friendly society.

1.2

If a firm carries on long-term insurance business and general insurance business, except where a particular provision provides otherwise, the rules in this Part apply separately to each type of business.

1.3

In this Part, the following definitions shall apply:

adjusted mathematical reserves

has the meaning given in 19.1.

administrative expenses

has the meaning set out in the insurance accounts rules.

base capital resources requirement

has the meaning given in 6.1.

defined benefits pension scheme

means a pension policy under which the only money-purchase benefits are benefits ancillary to other benefits which are not money-purchase benefits.

equity market adjustment ratio

means:

1. (1) if the ratio calculated in (a) and (b) lies between 75% and 100%, the result of 100% less the ratio (expressed as a percentage) of:
1. (a) the current value of the FTSE Actuaries All Share Index; to
2. (b) the average value of the FTSE Actuaries All Share Index over the preceding 90 calendar days;
2. (2) 0%, if the ratio calculated in (1)(a) and (b) is more than 100%; and
3. (3) 25%, if the ratio calculated in (1)(a) and (b) is less than 75%,

where the average value of the FTSE Actuaries All Share Index over any period of 90 calendar days is the arithmetic mean based on levels at the close of business on each of the days in that period on which the London Stock Exchange was open for trading.

gross adjusted claims amount

has the meaning given in 9.2 to 9.5.

gross adjusted premiums amount

has the meaning given in 8.2.

life protection reinsurance business

means reinsurance acceptances which are contracts of insurance:

1. (1) falling within long-term insurance business class I; or
2. (2) falling within long-term insurance business class III and providing index-linked benefits;

that are not:

1. (3) with-profits policies;
2. (4) whole life assurances;
3. (5) contracts to pay annuities on human life; or
4. (6) contracts which pay a sum of money on the survival of the life assured to a specific date or on his earlier death.

long-term gilt yield

means the annualised equivalent of the 15 year gilt yield for the UK Government fixed-interest securities index jointly compiled by the Financial Times, the Institute of Actuaries and the Faculty of Actuaries.

mixed insurer

means an insurer (other than a pure reinsurer) which carries on reinsurance business and where one or more of the following conditions is met in respect of its reinsurance acceptances:

1. (1) the premiums collected in respect of those acceptances during the previous financial year exceeded 10% of its total premiums collected during that year; and
3. (2) the technical provisions in respect of those acceptances at the end of the previous financial year exceeded 10% of its total technical provisions at the end of that year.

money-purchase benefits

means benefits, the rate or amount of which are calculated by reference to a payment or payments made by a member of the scheme.

permanent health reinsurance business

means reinsurance acceptances which are contracts of insurance falling within long-term insurance business class IV.

real estate market adjustment ratio

means:

1. (1) if the ratio calculated in (a) and (b) lies between 90% and 100%, the result of 100% less the ratio (expressed as a percentage) of:
1. (a) the current value of the real estate index; to
2. (b) the average value of that real estate index over the three preceding financial years;
2. (2) 0%, if the ratio calculated in (1)(a) and (b) is more than 100%; and
3. (3) 10%, if the ratio calculated in (1)(a) and (b) is less than 90%.

reinsurance ratio

has the meaning given in 11.1.

relevant assets

means a range of assets which must be selected by the firm pursuant to 20.2 from the assets specified in (1) and (2) in the order specified:

1. (1) its long-term insurance assets; and
2. (2) only where the firm has selected all the assets within (1), its shareholder assets, other than assets of an amount and kind required:
1. (a) to cover its liabilities arising outside its long-term insurance funds; or
2. (b) to meet any regulatory capital requirements in respect of business written outside its long-term insurance funds.

significant territory

means any country or territory in which more than 2.5% of a firm's long-term insurance assets (by market value), excluding assets held to cover index-linked liabilities or property-linked liabilities, are invested and for these purposes the member states of the EU which have adopted the Euro as the official currency may be treated as a single territory.

whole life assurance

means a contract of insurance which, disregarding any benefit payable on surrender, secures a capital sum only on death or either on death or on disability, but does not include a term assurance.