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COBS 21.3 Rules for firms engaged in linked long-term insurance business

COBS 21.3.1RRP

An insurer must not contract to provide benefits under linked long-term contracts of insurance that are determined:

  1. (1)

    wholly or partly, or directly or indirectly, by reference to fluctuations in any index other than an approved index;

  2. (2)

    wholly or partly by reference to the value of, or the income from, or fluctuations in the value of, property other than any of the following:

    1. (a)

      approved securities;

    2. (b)

      listed securities;

    3. (c)

      permitted unlisted securities;

    4. (d)

      permitted land and property;

    5. (e)

      permitted loans;

    6. (f)

      permitted deposits;

    7. (g)

      permitted scheme interests;

    8. (h)

      income from (a) to (g) above;

    9. (i)

      cash;

    10. (j)

      permitted units;

    11. (k)

      permitted stock lending; and

    12. (l)

      permitted derivatives contracts.

COBS 21.3.2GRP

Nothing in these rules prevents a firm making allowance in the value of any permitted link for any notional tax loss associated with the relevant linked assets for the purposes of fair pricing.

COBS 21.3.3R

A 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.

COBS 21.3.4G

In order to comply with the requirements of COBS 21.3.3 R a firm should:

  1. (1)

    disclose to policyholders the implications of any credit risk exposure they may face in relation to the solvency of the reinsurer; and

  2. (2)

    suitably monitor the way the reinsurer manages the business in order to discharge its continuing responsibilities to policyholders.