COBS 21.3 Rules for firms engaged in linked long-term insurance business
An insurer must not contract to provide benefits under linked long-term contracts of insurance that are determined:
- (1)
wholly or partly, or directly or indirectly, by reference to fluctuations in any index other than an approved index;
- (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:
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.
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.
In order to comply with the requirements of COBS 21.3.3 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.