COBS 21.2 1Rules1 for firms engaged in linked long-term insurance business
For the purposes of determining policyholder benefits, a1 firm must ensure that the values of its permitted links are determined fairly and accurately.
11An insurer must not contract to provide benefits under linked long-term contracts of insurance that are determined wholly or partly, directly or indirectly, by reference to fluctuations in any index or wholly or partly by reference to the value of, or the income from, or fluctuations in the value of, property other than in accordance with the rules in this section.
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.
Reinsurance
1A firm that has entered into a reinsurance contract in respect of its linked long-term insurance business must nevertheless discharge its responsibilities under its linked long-term insurance contracts, as if no reinsurance contract had been effected.
To comply with the requirements of COBS 21.2.4A R, a firm should:
- (1)
disclose to policyholders the implications of any credit-risk exposure they may face in relation to the solvency of the reinsurer; and
- (2)
suitably monitor the way the reinsurer manages the business in order to discharge its continuing responsibilities to policyholders.
Notification to the FCA
In considering what action to take in response to written notification of a failure to meet the requirements of this section, the appropriate regulator will have regard to the extent to which the relevant circumstances are exceptional and temporary and to any other reasons for the failure.