COBS 21.2 Principles for firms engaged in linked long-term insurance business
A firm must ensure that the values of its permitted links are determined fairly and accurately.
A firm must ensure that its linked assets:
- (1)
are capable of being realised in time for it to meet its obligations to linked policyholders; and
- (2)
are matched with its linked liabilities as required by the close matching rules.
A firm must ensure that there is no reasonably foreseeable risk that the aggregate value of any of its linked funds will become negative.
A firm must notify its linked policyholders of the risk profile and investment strategy for the linked fund:
- (1)
at inception, and
- (2)
before making any material changes.
A firm must ensure that its systems and controls and other resources are appropriate for the risks associated with its linked assets and linked liabilities.
- (1)
A firm must ensure when selecting linked assets that there is no reasonably foreseeable risk of a conflict of interest with its linked policyholders.
- (2)
If a conflict does arise, the firm must take reasonable steps to ensure that the interests of the linked policyholders are safeguarded.
In applying the rules in this section, a firm must consider the economic effect of its permitted links and linked assets ahead of their legal form.