1This chapter applies to a firm carrying on with-profits business, except to the extent modified in the following rules.

1. (1)

   The section on the process for reattribution (COBS 20.2.42 R to COBS 20.2.52 G):

   1. (a)

      applies to a firm that is proposing to make a reattribution of its inherited estate;

   2. (b)

      but not if, and to the extent that, it would require the firm to breach, or would prevent the firm from complying with, an order made by a court of competent jurisdiction.

2. (2)

   If a firm proposes to seek an order from a court of competent jurisdiction that would allow or require it to act in a way that is contrary to the rules on reattribution (COBS 20.2.42 R to COBS 20.2.52 G) (through, or because of, the exception in (1)(b)), the firm must:

   1. (a)

      tell the appropriate regulator that that is what it proposes to do;

   2. (b)

      seek the order at the earliest opportunity; and

   3. (c)

      if it wishes to take a step that would be contrary to those rules in anticipation of such an order, secure a waiver before it does so.

For an EEA insurer:

1. (1)

   the rules and guidance on treating with-profits policyholders fairly (COBS 20.2.1 G to COBS 20.2.41 G and COBS 20.2.53 R to COBS 20.2.60 G) apply only in so far as responsibility for the matter in question has not been reserved to the firm'sHome State regulator by an EU2 instrument;

   2
2. (2)

   COBS 20.3 (Principles and Practices of Financial Management) does not apply;

3. (3)

   the rule on providing information to with-profits policyholders who are habitually resident in the United Kingdom (COBS 20.4.4 R) and the rule on production and provision of a CFPPFM (COBS 20.4.5 R) apply, but the rest of COBS 20.4 (Communications with with-profits policyholders) does not; and

4. (4)

   the rule on production and provision of a CFPPFM (COBS 20.4.5 R) applies as if a reference to a firm was a reference to an EEA insurer in relation to any of its with-profits policyholders who are habitually resident in the United Kingdom.

The following do not apply to a non-directive friendly society:

1. (1)

   COBS 20.3 (Principles and Practices of Financial Management);

   3
2. (2)

   COBS 20.4 (Communications with with-profits policyholders); and3

3. (3)

   COBS 20.5 (With-profits governance).3

This chapter does not apply to with-profits business that consists of effecting or carrying out Holloway sickness policies.

2A firm must take reasonable care to ensure that all aspects of its operating practice are fair to the interests of its with-profits policyholders and do not lead to an undisclosed, or otherwise unfair, benefit to shareholders or to other persons with an interest in the with-profits fund.

Neither Principle 6 (Customers' interests) nor the rules on treating with-profits policyholders fairly (COBS 20.2) relieve a firm of its obligation to deliver each policyholder's contractual entitlement.

A firm must have good reason to believe that its pay-outs on individual with-profits policies are fair.

1. (1)

   Unless a firm cannot reasonably compare a maturity payment with a calculated asset share, it must:

   1. (a)

      set a target range for the maturity payments that it will make on:

      1. (i)

         all of its with-profits policies; or

      2. (ii)

         each group of its with-profits policies;

   2. (b)

      ensure that each target range:

      1. (i)

         is expressed as a percentage of unsmoothed asset share; and

      2. (ii)

         includes 100% of unsmoothed asset share; and

   3. (c)

      manage its with-profits business, and the business of each with-profit fund, with the aim of making on each with-profit policy a maturity payment that falls within the relevant target range.

2. (2)

   Unsmoothed asset share means:

   1. (a)

      the unsmoothed asset share of the relevant with-profits policy; or

   2. (b)

      an estimate of the unsmoothed asset share of the relevant with-profits policy derived from the unsmoothed asset share of one or more specimen with-profits policies, which a firm has selected to represent a group, or all, of the with-profits policies effected in the same with-profits fund.

3. (3)

   A firm must calculate unsmoothed asset share by:

   1. (a)

      applying the methods in INSPRU 1.3.119 R to INSPRU 1.3.123 R;

   2. (b)

      including any amounts that have been added to the policy as the result of a distribution from an inherited estate; and

   3. (c)

      subject to (d), and where the terms of the policy so provide, adding or subtracting an amount that reflects the experience of the insurance business in the relevant with-profits fund; but

   4. (d)

      if a with-profits fund has suffered adverse experience, which results from a firm's failure to comply with the rules and guidance on treating with-profits policyholders fairly (COBS 20.2.1 G to COBS 20.2.41 G and COBS 20.2.53 R to COBS 20.2.60 G), that adverse experience may only be taken into account if, and to the extent that, in the reasonable opinion of the firm'sgoverning body, the amount referred to in (c) cannot be met from:

      1. (i)

         the firm'sinherited estate (if any); or

      2. (ii)

         any assets attributable to shareholders, whether or not they are held in the relevant with-profits fund.

Notwithstanding that a firm must aim to make maturity payments that fall within the relevant target range, a firm may make a maturity payment that falls outside the target range if it has a good reason to believe that at least 90% of maturity payments on with-profits policies in that group have fallen, or will fall, within the relevant target range.

A firm may make deductions from asset share to meet the cost of guarantees, or the cost of capital, only under a plan approved by its governing body and described in its PPFM. A firm must ensure that any deductions are proportionate to the costs they are intended to offset.

If a firm has approved a plan to make deductions from asset share, it must ensure that its planned deductions do not change unless justified by changes in the business or economic environment, or changes in the nature of the firm's liabilities as a result of policyholders exercising options in their policies.

If a firm calculates maturity payments using the prescribed asset share methodology, it must manage its with-profits business, and each with-profits fund, with the longer term aim that it will make aggregate maturity payments of 100% of unsmoothed asset share.

If a firm calculates surrender payments using the prescribed asset share methodology, it must first calculate what the surrender payment would be if it was a maturity payment calculated by that methodology.

A firm may then make a deduction from unsmoothed asset share if necessary, in the reasonable opinion of the firm'sgoverning body, to protect the interests of the firm's remaining with-profits policyholders.

A firm must not, in so far as is reasonably practicable,2 make a market value reduction to the face value of the units of an accumulating with-profits policy unless:

1. (1)

   the market value of the with-profits assets in the relevant with-profits fund is, or is expected to be, less than the assumed value of the assets on which the face value of the units of the policy has been based; and2

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2. (2)

   the market value reduction is no greater than is necessary to reflect the impact of the difference in value referred to in (1) on the relevant payment out to the policyholder.2

   2

A firm must ensure that the amount distributed to policyholders from a with-profits fund, taking into account any adjustments required by COBS 20.2.17A R,2 is not less than the required percentage of the total amount distributed.

1. (1)

   2Where a firm adjusts the amounts distributed to policyholders, either by market value reduction or otherwise, in a way that would result in a distribution to policyholders of less than the required percentage, taking both the relevant distributions and the adjustment into account, then the firm must apply a proportionate adjustment to amounts distributed to shareholders so that the distribution to policyholders will not be less than the required percentage.

2. (2)

   The adjustments referred to in (1) include but are not limited to a situation where such an adjustment has the effect of retrospectively reducing past policyholder distributions.

7A firm must not make a distribution from a with-profits fund, unless the whole of the cost of that distribution can be met without eliminating the regulatory surplus in that with-profits fund.

A realistic basis life firm must not make a distribution from a with-profits fund to any person who is not a with-profits policyholder, unless the whole of the cost of that distribution (including the cost of any obligations that will or may arise from the decision to make a distribution) can be met from the excess of the realistic value of assets over the realistic value of liabilities in that with-profits fund.

A distribution to a person who is not a with-profits policyholder includes a transfer of assets out of a with-profits fund that is not made to satisfy a liability of that fund.

If, on a distribution, a firm incurs a tax liability on a transfer to shareholders, it must not attribute that tax liability to a with-profits fund, unless:

1. (1)

   the firm can show that attributing the tax liability to that with-profits fund is consistent with its established practice;

2. (2)

   that established practice is explained in the firm's PPFM; and

3. (3)

   that liability is not charged to asset shares.

At least once a year (or, in the case of a non-directive friendly society, at least once in every three years) and whenever a firm is seeking to make a reattribution of its inherited estate,2 a firm'sgoverning body must determine whether the firm'swith-profits fund, or any of the firm'swith-profits fund, has an excess surplus.

A firm must only charge costs to a with-profits fund1 which have been, or will be, incurred in operating the with-profits fund. This may include a fair proportion of overheads.

Subject to COBS 20.2.25 R, COBS 20.2.25A R and COBS 20.2.25B R, a1firm must not pay compensation or redress from a with-profits fund.

A proprietary1firm may pay compensation or redress due to a policyholder, or former policyholder, from assets attributable to shareholders, whether or not they are held within a long-term insurance fund.1

A mutual may pay compensation or redress due to a policyholder, or formerpolicyholder, from a with-profits fund, but may only pay from assets that would otherwise be attributable to asset shares if, in the reasonable opinion of the firm'sgoverning body, the compensation or redress cannot be paid from any other assets in the with-profits fund.

A payment or transfer of liabilities made to correct an error and which has the effect of restoring a policyholder, or former policyholder, and the with-profits fund to the position they would have been in if the error had not occurred (a “rectification payment”), is not a payment of compensation or redress for the purposes of COBS 20.2.24 R.

A proprietary firm must not charge to a with-profits fund any amounts paid or payable to a skilled person in connection with a report under section 166 of the Act (Reports by skilled persons) if the report indicates that the firm has, or may have, materially failed to satisfy its obligations under the regulatory system1.

A firm must not charge a contribution to corporation tax to a with-profits fund, if that contribution exceeds the notional corporation tax liability that would be charged to that with-profits fund if it were assessed to tax as a separate body corporate.

A firm must not effect new contracts of insurance in an existing with-profits fund unless:2

1. (1)

   the firm'sgoverning body is satisfied, so far as it reasonably can be, and can demonstrate, having regard to the analysis in (2), that the terms on which each type of contract is to be effected are likely to have no adverse effect on the interests of the with-profits policyholders whose policies are written into that fund; and2

2. (2)

   the firm has:

   1. (a)

      carried out or obtained appropriate analysis, based on relevant evidence and proportionate to the risks involved, as to the likely impact on with-profits policyholders, having regard to relevant factors including:

      1. (i)

         the volumes of each type of contract that the firm expects to be effected; and

      2. (ii)

         the periods over which the contracts are expected to remain in force; and

   2. (b)

      provided the analysis referred to in (a) to its with-profits committee or, if applicable, its with-profits advisory arrangement and to its governing body for the purposes of (1).2

A firm carrying on with-profits business must not:

1. (1)

   make a loan to a connected person using assets in a with-profits fund; or

2. (2)

   give a guarantee to, or for the benefit of, a connected person, where the guarantee will be backed using assets in a with-profits fund;

unless that loan or guarantee:

1. (3)

   will be on commercial terms;

2. (4)

   will, in the reasonable opinion of the firm's senior management, be beneficial to the with-profits policyholders in the relevant with-profits fund; and

3. (5)

   will not, in the reasonable opinion of the firm's senior management, expose those policyholders to undue credit or group risk.

A firm must not:2

1. (1)

   use with-profits assets to finance the purchase of a strategic investment, directly or by or through a connected person; or2

2. (2)

   retain an investment referred to in (1);2

unless its governing body is satisfied, so far as it reasonably can be, and can demonstrate, that the purchase or retention is likely to have no adverse effect on the interests of its with-profits policyholders whose policies are written into the relevant fund.2

2A firm must keep adequate records setting out the strategic purpose for which a strategic investment has been purchased or retained.

A firm must not enter into a material transaction relating to a with-profits fund unless, in the reasonable opinion of the firm'sgoverning body, the transaction is unlikely to have a material adverse effect on the interests of that fund's existing with-profits policyholders.

A material transaction includes a series of related non-material transactions which, if taken together, are material.

2A firm must contact the FCA as soon as is reasonably practicable to make arrangements to discuss what actions may be required to ensure the fair treatment of with-profits policyholders if, in relation to any with-profits fund it operates:

1. (1)

   the firm reasonably expects, or if earlier, there has been, a sustained and substantial fall in either the volume of new non-profit insurance contracts, or in the volume of new with-profits policies (effected other than by reinsurance), or in both, effected into the with-profits fund; or

2. (2)

   the firm cedes by way of reinsurance most or all of the new with-profits policies which it continues to effect.

A firm that is seeking to make a reattribution of its inherited estate must:

1. (1)

   first discuss with the FCA7 (as part of its determination under COBS 20.2.21 R):2

   27
   1. (a)

      its projections for capital required to support existing business, which must include an assessment of:2

      1. (i)

         the firm's future risk appetite for the with-profits fund and other relevant business; and2

      2. (ii)

         how much of the margin for prudence can be identified as excessive and removed from the projected capital requirements; and2

   2. (b)

      its projections for capital required to support future new business, which must include an assessment of:2

      1. (i)

         new business volumes;2

      2. (ii)

         product terms; and2

      3. (iii)

         pricing margins;2

2. (2)

   following the discussions referred to in (1), identify at the earliest appropriate point a policyholder advocate, who is free from any conflicts of interest that may be, or may appear to be, detrimental to the interests of policyholders, to negotiate with the firm on behalf of relevant with-profits policyholders and 2seek the approval of the FCA7 for the appointment of the policyholder advocate as soon as he is identified, or appoint a policyholder advocate nominated by the FCA7 if its approval is not granted; and

   77
3. (3)

   involve the policyholder advocate designate at the earliest possible opportunity to enable him to participate effectively in the negotiations about the proposals for the reattribution.

A firm must:

1. (1)

   notify the FCA of the terms on which it proposes to appoint a policyholder advocate (whether or not the candidate was nominated by the FCA); and

2. (2)

   ensure that the terms of appointment for the policyholder advocate:

   1. (a)

      include a description of the role of the policyholder advocate as agreed with the FCA under COBS 20.2.44 G;2

   2. (aA)

      stress the independent nature of the policyholder advocate's appointment and function, and are consistent with it;2

   3. (b)

      define the relationship of the policyholder advocate to the firm and its policyholders;

   4. (c)

      set out arrangements for communications between the policyholder advocate and policyholders;

   5. (d)

      make provision for the resolution of any disputes between the firm and the policyholder advocate;

   6. (e)

      specify when and how the policyholder advocate's appointment may be terminated;

      2
   7. (f)

      allow the policyholder advocate to communicate freely and in confidence with the FCA;2

   8. (g)

      require the policyholder advocate to communicate with policyholders:2

      1. (i)

         as soon as is practicable after his appointment, having regard to (h)(i) and (iii); and2

      2. (ii)

         thereafter no less frequently than every six months for the duration of the policyholder advocate's appointment; and2

   9. (h)

      require the policyholder advocate:2

      1. (i)

         to make reasonable endeavours to agree with the firm the contents of any proposed policyholder communications;2

      2. (ii)

         to allow sufficient time for the process in (i) in order to meet any timescales in (g); and2

      3. (iii)

         to provide copies of the final draft of the intended policyholder communications, whether or not agreement has been reached in accordance with (i) above, both to the firm and to the FCA at least seven days in advance of the date on which the policyholder advocate intends to make the communications.2

Where a firm is not otherwise required to appoint an independent expert, it must:

1. (1)

   appoint a reattribution expert to undertake an objective assessment of its reattribution proposals, who must be:

   1. (a)

      nominated or approved by the appropriate regulator before he is appointed; and

   2. (b)

      free from any conflicts of interest that may, or may appear to, undermine his independence or the quality of his report;

2. (2)

   ensure that the reattribution expert's terms of appointment allow him to communicate freely and in confidence with the appropriate regulator; and

3. (3)

   require the reattribution expert to prepare a report which must be available to the appropriate regulator, the policyholder advocate and the court (if it is relevant to any court proceedings).

A firm must ensure that every policyholder that may be affected by the proposed reattribution is sent appropriate and timely information about:

1. (1)

   the reattribution process, including the role of the policyholder advocate, the independent expert or reattribution expert, as the case may be, and other individuals appointed to perform particular functions;

2. (2)

   the reattribution proposals and how they affect the relevant policyholders, including an explanation of any benefits they are likely to receive and the rights and interests that they are likely to be asked to give up;

3. (3)

   the policyholder advocate's views on the reattribution proposals and any benefits the relevant policyholders are likely to receive and the rights and interests that they are likely to be asked to give up; and

4. (4)

   the outcome of the negotiations between the firm and the policyholder advocate about the benefits that will be offered to relevant with-profits policyholders, in exchange for the rights and interests that they will be asked to give up.

An adequate summary of the report by the reattribution expert must be made available to every policyholder that may be affected by the proposed reattribution.

A firm must give relevant with-profits policyholders the option to:

1. (1)

   individually accept or reject the final proposals for the reattribution; or

2. (2)

   (if the legal process to be followed allows the majority of policyholders to bind the minority) vote on whether the firm should go ahead with those proposals.

A firm must:

1. (1)

   inform the appropriate regulator and its with-profits policyholders within 28 days; and

2. (2)

   submit a run-off plan to the appropriate regulator as soon as reasonably practicable and, in any event, within three months;

of first ceasing to effect new contracts of insurance in a with-profits fund.

A firm will be taken to have ceased to effect new contracts of insurance in a with-profits fund:

1. (1)

   when any decision by the governing body to cease to effect new contracts of insurance takes effect; or

2. (2)

   where no such decision is made, when the firm is no longer:

   1. (a)

      actively seeking to effect new contracts of insurance in that fund; or

   2. (b)

      effecting new contracts of insurance in that fund, except by increment; or2

3. (3)

   if the firm:2

   1. (a)
      1. (i)

         is no longer effecting a material volume of with-profits policies (other than by reinsurance), into the with-profits fund; or2

      2. (ii)

         is ceding by way of reinsurance most or all of the new with-profits policies which it continues to effect; and2

   2. (b)

      cannot demonstrate that it will treat with-profits policyholders fairly if it does not cease to effect new contracts of insurance.2

The run-off plan required by COBS 20.2.53 R2 must:

1. (1)

   include an up-to-date plan to2 demonstrate how the firm will ensure a fair distribution of the closed with-profits fund, and its inherited estate (if any); and

2. (2)

   be approved by the firm'sgoverning body.

1. (1)

   A firm must:

   1. (a)

      establish and maintain the PPFM according to which its with-profits business is conducted (or, if appropriate, separate PPFM for each with-profits fund); and

   2. (b)

      retain a record of each version of its PPFM for five years.

2. (2)

   A firm'swith-profits principles must:

   1. (a)

      be enduring statements of the standards it adopts in managing with-profits funds; and

   2. (b)

      describe the business model it uses to meet its duties to with-profits policyholders and to respond to longer-term changes in the business and economic environment.

3. (3)

   A firm'swith-profits practices must:

   1. (a)

      describe how a firm manages its with-profits funds and how it responds to shorter-term changes in the business and economic environment; and

   2. (b)

      be sufficiently detailed for a knowledgeable observer to understand the material risks and rewards from effecting or maintaining a with-profits policy with it.

4. (4)

   A firm must not change its PPFM unless, in the reasonable opinion of its governing body, that change is justified to:

   1. (a)

      respond to changes in the business or economic environment; or

   2. (b)

      protect the interests of policyholders; or

   3. (c)

      change the firm'swith-profits practices better to achieve its with-profits principles.

5. (5)

   A firm may change its PPFM if that change:

   1. (a)

      is necessary to correct an error or omission; or

   2. (b)

      would improve clarity or presentation without materially affecting the PPFM’s substance; or

   3. (c)

      is immaterial.

A firm'sPPFM must cover the issues set out in the table in COBS 20.3.6 R.

A firm'sPPFM must cover any matter that has, or it is reasonably foreseeable may have, a significant impact on the firm's management of with-profits funds, including but not limited to:

1. (1)

   any requirements or constraints that apply as a result of previous dealings, including previous business transfer schemes; and

2. (2)

   the nature and extent of any shareholder commitment to support the with-profits fund.

A firm must:

1. (1)

   on request, provide its PPFM, or the PPFM applicable to specified with-profits funds:

   1. (a)

      free of charge to its with-profits policyholders; or

   2. (b)

      for a reasonable charge to any person who is not its with-profits policyholder; and

2. (2)

   if the firm publishes its PPFM on its website, prominently signpost its location there.

A firm must send its with-profits policyholders who are affected by any change in its PPFM, written notice, setting out any:

1. (1)

   proposed changes to the with-profits principles, three months in advance of the effective date; and

2. (2)

   changes to the with-profits practices, within a reasonable time.

A firm need not give the notice required if the change to its PPFM:

1. (1)

   is necessary to correct an error or omission; or

2. (2)

   would improve clarity or presentation without materially affecting the PPFM's substance; or

3. (3)

   is immaterial.

In relation to any with-profits policyholder who is habitually resident in the United Kingdom, an EEA insurer must:

1. (1)

   on request, provide the information necessary to enable that policyholder properly to understand the insurer's commitment under the policy;

2. (2)

   ensure that the information provided is not narrower in scope or less detailed in content than the equivalent PPFM; and

3. (3)

   send the policyholder who is affected by any information being changed written notice, setting out:

   1. (a)

      any proposed changes to information that is equivalent to the with-profits principles, three months in advance of the effective date; and

   2. (b)

      any changes to information that is equivalent to the with-profits practices, within a reasonable time.

A firm must:

1. (1)

   produce a CFPPFM describing the most important information set out under each of the headings in its PPFM and keep it up to date as the PPFM changes over time;

2. (2)

   express its CFPPFM in clear and plain language that can be easily understood by a with-profits policyholder, or potential with-profits policyholder who does not possess any specialist or technical knowledge;

3. (3)

   provide its CFPPFM free of charge with any:

   1. (a)

      written notice sent to with-profits policyholders on proposed changes to its with-profits principles (where the firm must provide the version of the CFPPFM in use before the changes if this has not already been provided);

   2. (b)

      annual statements sent to its with-profits policyholders (unless there has been no material change in the CFPPFM since it was last supplied); and

   3. (c)

      key features document for1 a with-profits policy; and

4. (4)

   make its CFPPFM publicly available and prominently signpost the availability on its website.

A firm must produce an annual report to its with-profits policyholders, which must:

1. (1)

   state whether, throughout the financial year to which the report relates, the firm believes it has complied with its obligations relating to its PPFM and setting out its reasons for that belief;

2. (2)

   address all significant relevant issues, including the way in which the firm has:

   1. (a)

      exercised, or failed to exercise, any discretion that it has in the conduct of its with-profits business; and

   2. (b)

      addressed any competing or conflicting rights, interests or expectations of its policyholders (or groups of policyholders) and, if applicable, shareholders (or groups of shareholders), including the competing interests of different classes and generations.

1A firm must, in relation to each with-profits fund it operates:

1. (1)

   appoint:

   1. (a)

      a with-profits committee; or

   2. (b)

      a with-profits advisory arrangement (referred to in this section as an ‘advisory arrangement’), but only if appropriate, in the opinion of the firm'sgoverning body, having regard to the size, nature and complexity of the fund in question;

2. (2)

   ensure that the with-profits committee or advisory arrangement operates in accordance with its terms of reference; and

3. (3)

   make available a copy of any terms of reference on the firm's website, or if the firm does not have a website, at the request of policyholders.

A firm must ensure that the terms of reference contain, as a minimum, terms having the following effect:

1. (1)

   the role of the with-profits committee or advisory arrangement is, as relevant, to assess, report on, and provide clear advice and, where appropriate, recommendations to the firm'sgoverning body on:

   1. (a)

      the way in which each with-profits fund is managed by the firm and, if a PPFM is required, whether this is properly reflected in the PPFM;

   2. (b)

      if applicable, whether the firm is complying with the principles and practices set out in the PPFM;

   3. (c)

      whether the firm has addressed effectively the conflicting rights and interests of with-profits policyholders and other policyholders or stakeholders including, if applicable, shareholders, in a way that is consistent with Principle 6 (treating customers fairly); and

   4. (d)

      any other issues with which the firm'sgoverning body, with-profits committee or advisory arrangement considers with-profits policyholders might reasonably expect the with-profits committee or advisory arrangements to be involved;

2. (2)

   that the with-profits committee or advisory arrangement must:

   1. (a)

      decide on the specific matters it will consider in order to enable it to carry out its role described in (1)(a) to (d) as appropriate to the particular circumstances of the with-profits fund(s); and

   2. (b)

      in any event give appropriate consideration to the following non-exhaustive list of specific matters:

      1. (i)

         the identification of surplus and excess surplus, the merits of its distribution or retention and the proposed distribution policy;

      2. (ii)

         how bonus rates, smoothing and, if relevant, market value reductions have been calculated and applied;

      3. (iii)

         if relevant, the relative interests of policyholders with and without valuable guarantees;

      4. (iv)

         the firm's with-profits customer communications such as annual policyholder statements and product literature and whether the with-profits committee or advisory arrangement wishes to make a statement or report to with-profits policyholders in addition to the annual report made by a firm;

      5. (v)

         any significant changes to the risk or investment profile of the with-profits fund including the management of material illiquid investments and the firm's obligations in relation to strategic investments;

      6. (vi)

         the firm's strategy for future sales supported by the assets of the with-profits fund and its impact on surplus;

      7. (vii)

         the impact of any management actions planned or implemented;

      8. (viii)

         relevant management information such as customer complaints data (but not necessarily information relating to individual customer complaints);

      9. (ix)

         the drafting, review, updating of and compliance with run-off plans, court schemes and similar matters; and

      10. (x)

          the costs incurred in operating the with-profits fund;

3. (3)

   that any person appointed as a member of the with-profits committee or as a person carrying out the advisory arrangement must have the appropriate skills, knowledge and experience to perform, or contribute to, as appropriate, the role set out in (1) and (2);

4. (4)

   if the firm appoints a with-profits committee:

   1. (a)

      that there must be three or more members;

   2. (b)

      that the quorum for any meeting (or decision by written procedure) must be at least half of the number of, and no less than two, members; and

5. (5)

   that the with-profits committee or advisory arrangement must:

   1. (a)

      advise the governing body on the suitability of candidates proposed for appointment as the with-profits actuary; and

   2. (b)

      assess the performance of the with-profits actuary at least annually, and report its view to the governing body of the firm.

A firm must:

1. (1)

   ensure that its governing body, in the context of its consideration of issues referred to in COBS 20.5.3R (1)(a) to (d) and (2)(b)(i) to (x):

   1. (a)

      obtains, as relevant, assessments, reports, advice and/or recommendations of the with-profits committee or advisory arrangement, if the governing body, the with-profits committee or advisory arrangement considers that significant issues concerning the interests of with-profits policyholders need to be considered by the firm;

   2. (b)

      allows the with-profits committee or advisory arrangement sufficient time to enable it to provide fully considered input on the issues to be considered;

   3. (c)

      considers fully and gives due regard to the input of the with-profits committee or advisory arrangement when determining issues concerning the management of the with-profits funds and the interests of with-profits policyholders;

   4. (d)

      if the governing body decides to depart in any material way from the advice or recommendations of the with-profits committee or advisory arrangement, sets out fully its reasons and allows the with-profits committee or advisory arrangement a reasonable period to consider them and respond; and

   5. (e)

      considers any further representations from the with-profits committee or advisory arrangement and, if appropriate, sets out fully any additional reasons if it continues to depart from the with-profits committee or advisory arrangement’s advice or recommendation;

2. (2)

   provide a with-profits committee or advisory arrangement with sufficient resources as it may reasonably require to enable it to perform its role effectively;

3. (3)

   notify the FCA of the decision of the governing body to depart from the advice or recommendation of the with-profits committee or advisory arrangement if the with-profits committee or advisory arrangement considers that the issue is sufficiently significant and requests of the governing body that the FCA be informed; and

4. (4)

   consult the with-profits actuary on the appointment of a new member of the with-profits committee or of the person or persons carrying out the advisory arrangement.