INSPRU 1.1 Application

1 INSPRU 1.1 applies to an insurer unless it is:

1. (1)

   a non-directive friendly society; or

2. (2)

   an incoming EEA firm; or

3. (3)

   an incoming Treaty firm

1. (1)

   This section applies to a firm in relation to the whole of its business, except where a particular provision provides for a narrower scope.

2. (2)

   Where a firm carries on both long-term insurance business and general insurance business, this section applies separately to each type of business.

For a non-EEA insurer with a branch in the United Kingdom whose insurance business in the United Kingdom is not restricted to reinsurance (other than an EEA-deposit insurer, a Swiss general insurer or a UK-deposit insurer):

1. (1)

   the part of this section headed "Capital requirements for insurers" (INSPRU 1.1.43 G to INSPRU 1.1.92B G) applies to its world-wide activities;

2. (2)

   the parts of this section headed:

   1. (a)

      "Establishing technical provisions" (INSPRU 1.1.12 R to INSPRU 1.1.19 G);

   2. (b)

      "Reinsurance and analogous non-reinsurance financing agreements: risk transfer principle" (INSPRU 1.1.19A R to INSPRU 1.1.19F G);

   3. (c)

      "Assets of a value sufficient to cover technical provisions and other liabilities" (INSPRU 1.1.20 R to INSPRU 1.1.29 G);

   4. (d)

      "Matching of assets and liabilities" (INSPRU 1.1.34 R to INSPRU 1.1.40 G); and

   5. (e)

      "Premiums for new business" (INSPRU 1.1.41 R to INSPRU 1.1.42 G);

   apply separately in respect of its world-wide activities and its activities carried on from a branch in the United Kingdom; and

3. (3)

   the part of this section headed "Localisation" (INSPRU 1.1.30 R to INSPRU 1.1.33 R) does not apply (see INSPRU 1.5 (Internal contagion risk)).

For an EEA-deposit insurer or a Swiss general insurer:

1. (1)

   the parts of this section headed:

   1. (a)

      "Establishing technical provisions" (INSPRU 1.1.12 R to INSPRU 1.1.19 G);

   2. (b)

      "Reinsurance and analogous non-reinsurance financing agreements: risk transfer principle" (INSPRU 1.1.19A R to INSPRU 1.1.19F G);

   3. (c)

      "Assets of a value sufficient to cover technical provisions and other liabilities" (INSPRU 1.1.20 R to INSPRU 1.1.29 G);

   4. (d)

      "Matching of assets and liabilities" (INSPRU 1.1.34 R to INSPRU 1.1.40 G); and

   5. (e)

      "Premiums for new business" (INSPRU 1.1.41 R to INSPRU 1.1.42 G);

   apply in respect of the activities of the firm carried on from a branch in the United Kingdom; and

2. (2)

   the parts of this section headed "Capital requirements for insurers" (INSPRU 1.1.43 G to INSPRU 1.1.92B G) and "Localisation" (INSPRU 1.1.30 R to INSPRU 1.1.33 R) do not apply.

For a UK-deposit insurer:

1. (1)

   the part of this section headed "Capital requirements for insurers" (INSPRU 1.1.43 G to INSPRU 1.1.92B G) applies to its world-wide activities;

2. (2)

   the parts of this section headed:

   1. (a)

      "Establishing technical provisions" (INSPRU 1.1.12 R to INSPRU 1.1.19 G);

   2. (b)

      "Reinsurance and analogous non-reinsurance financing agreements: risk transfer principle" (INSPRU 1.1.19A R to INSPRU 1.1.19F G);

   3. (c)

      "Assets of a value sufficient to cover technical provisions and other liabilities" (INSPRU 1.1.20 R to INSPRU 1.1.29 G);

   4. (d)

      "Matching of assets and liabilities" (INSPRU 1.1.34 R to INSPRU 1.1.40 G); and

   5. (e)

      "Premiums for new business" (INSPRU 1.1.41 R to INSPRU 1.1.42 G);

   apply separately in respect of its world-wide activities and its activities carried on from branches in EEA States; and

3. (3)

   the part of this section headed "Localisation" (INSPRU 1.1.30 R to INSPRU 1.1.33 R) does not apply (see INSPRU 1.5 (Internal contagion risk)).

For general insurance business, a firm must establish adequate technical provisions:

1. (1)

   in accordance with the rules in INSPRU 1.4 for equalisation provisions; and

2. (2)

   otherwise, in accordance with GENPRU 1.3.4 R.

For long-term insurance business, a firm must establish adequate technical provisions in respect of its long-term insurance contracts as follows:

1. (1)

   mathematical reserves in accordance with the rules and guidance in INSPRU 1.2 relating to such reserves, and with due regard to generally accepted actuarial practice; and

2. (2)

   for liabilities in respect of such contracts that have fallen due, in accordance with GENPRU 1.3.4 R.

1. (1)

   A firm may only take credit for reinsurance if and to the extent that there has been an effective transfer of risk from the firm to a third party.

2. (2)

   In INSPRU 1.1.19A R to INSPRU 1.1.19F G, references to reinsurance and contracts of reinsurance include:

   1. (a)

      all contracts of reinsurance with an ISPV; and

   2. (b)

      analogous non-reinsurance financing agreements.

For the purposes of INSPRU 1.1.19AR (2)(b), analogous non-reinsurance financing agreements include contingent loans, securitisations and any other arrangements in respect of contracts of insurance that are analogous to contracts of reinsurance in terms of the risks transferred and the finance provided.

A firm which is not a composite firm must hold admissible assets of a value at least equal to the amount of:

1. (1)

   the technical provisions that it is required to establish under INSPRU 1.1.12 R or INSPRU 1.1.16 R; and

2. (2)

   its other general insurance liabilities or long-term insurance liabilities;

but excluding, where the firm is not a pure reinsurer,4property-linked liabilities and index-linked liabilities and the assets held to cover them under INSPRU 3.1.57 R and INSPRU 3.1.58 R.

A composite firm must ensure that:

1. (1)

   it holds admissible assets separately identified in accordance with INSPRU 1.5.18 R of a value at least equal to the amount of:

   1. (a)

      the technical provisions that it is required to establish under INSPRU 1.1.16 R; and

   2. (b)

      its other long-term insurance liabilities;

   but excluding, where the firm is not a pure reinsurer,4property-linked liabilities and index-linked liabilities and the assets held to cover them under INSPRU 3.1.57 R and INSPRU 3.1.58 R; and

2. (2)

   it holds other admissible assets (other than those excluded under (1)) of a value at least equal to the amount of:

   1. (a)

      the technical provisions that it is required to establish under INSPRU 1.1.12 R; and

   2. (b)

      its other general insurance liabilities.

For the purpose of determining the value of assets available to meet technical provisions and other long-term insurance liabilities in accordance with INSPRU 1.1.20 R, INSPRU 1.1.21 R, INSPRU 1.1.27 R and INSPRU 1.1.28 R, no value is to be attributed to:

1. (1)

   debts owed by reinsurers; or

2. (2)

   claims; or

3. (3)

   tax recoveries; or

4. (4)

   claims against compensation funds;

to the extent already offset in the calculation of technical provisions.

A firm carrying on long-term insurance business must ensure that it has admissible assets in each of its with-profits funds of a value sufficient to cover:

1. (1)

   the technical provisions in respect of all the business written in that with-profits fund; and

2. (2)

   its other long-term insurance liabilities in respect of that with-profits fund.

In addition to complying with INSPRU 1.1.27 R, a realistic basis life firm must also ensure that the realistic value of assets for each of its with-profits funds is at least equal to the realistic value of liabilities of that fund.

1. (1)

   Subject to (2), a UK firm must hold admissible assets held pursuant to INSPRU 3.1.53 R:

   1. (a)

      (where the admissible assets cover technical provisions in pounds sterling), in any EEA State; and

   2. (b)

      (where the admissible assets cover technical provisions in any currency other than pounds sterling), in any EEA State or in the country of that currency.

2. (2)

   In the case of a community co-insurance operation and a relevant insurer, the admissible assets covering technical provisions must be held in any EEA State.

INSPRU 1.1.30 R does not apply to:

1. (1)

   a pure reinsurer; or

2. (2)

   debts owed by reinsurers; or

3. (3)

   insurance business carried on by a UK firm outside the EEA States; or

4. (4)

   general insurance businessclass groups 3 and 4 in IPRU(INS), Annex 11.2, Part II.

For the purposes of INSPRU 1.1.30 R:

1. (1)

   a tangible asset is to be treated as held in the country or territory where it is situated;

2. (2)

   an admissible asset consisting of a claim against a debtor is to be treated as held in any country or territory where it can be enforced by legal action;

3. (3)

   a security which is listed5 is to be treated as held in any country or territory where there is a regulated market on which the security is dealt; and

   5
4. (4)

   a security which is not listed5 is to be treated as held in the country or territory in which the issuer has its head office.

   5

1. (1)

   Subject to (4), the assets held by a firm to cover its technical provisions and other long-term insurance liabilities or general insurance liabilities (see INSPRU 1.1.20 R and INSPRU 1.1.21 R) must:

   1. (a)

      have characteristics of safety, yield and marketability which are appropriate to the type of business carried on by the firm;

   2. (b)

      be diversified and adequately spread; and

   3. (c)

      comply with (2).

2. (2)

   The assets referred to in (1) must, in addition to meeting the criteria set out in (1)(a) and (b), be of a sufficient amount, and of an appropriate currency and term, to ensure that the cash inflows from those assets will meet the expected cash outflows from the firm's insurance liabilities as they become due.

3. (3)

   For the purpose of (2), a firm must take into consideration in determining expected cash outflows any options which exist in the firm'scontracts of insurance.

4. (4)

   (1) does not apply to:

   1. (a)

      a pure reinsurer; or

   2. (b)

      assets held to cover index-linked liabilities or property-linked liabilities, except that where the linked long-term contract of insurance in question includes a guarantee of investment performance or some other guaranteed benefit, (1) will nevertheless apply to assets held to cover that guaranteed element.

A firm must not enter into a long-term insurance contract unless it is satisfied on reasonable actuarial assumptions that:

1. (1)

   the premiums receivable and the investment income expected to be earned from those premiums; and

2. (2)

   the reinsurance arrangements made in respect of the risk or risks covered by that new contract are sufficient to enable it, when taken together with the firm's other resources, to:

   1. (a)

      establish adequate technical provisions as required by INSPRU 1.1.16 R;

   2. (b)

      hold admissible assets of a value at least equal to the amount of the technical provisions and other long-term insurance liabilities as required by INSPRU 1.1.20 R to INSPRU 1.1.28 R; and

   3. (c)

      maintain adequate overall financial resources as required by the overall financial adequacy rule.

The premiums amount is:

1. (1)

   18% of the gross adjusted premiums amount; less 2% of the amount, if any, by which the gross adjusted premiums amount exceeds €61.37 million; multiplied by

   667
2. (2)

   the reinsurance ratio set out in INSPRU 1.1.54 R.

The claims amount is:

1. (1)

   26% of the gross adjusted claims amount; less 3% of the amount, if any, by which the gross adjusted claims amount exceeds €42.97 million; multiplied by

   667
2. (2)

   the reinsurance ratio set out in INSPRU 1.1.54 R.

For the purposes of INSPRU 1.1.45R (1) and INSPRU 1.1.47R (1), the exchange rate from the Euro to the pound sterling for each year beginning on 31 December is the rate applicable on the last day of the preceding October for which the exchange rates for the currencies of all the European Union member states were published in the Official Journal of the European Union.

1. (1)

   Subject to (2) and (3), the brought forward amount is the general insurance capital requirement (GICR) for the prior financial year, multiplied, if the ratio is less than one, by the ratio (expressed as a percentage) of:4

   4
   1. (a)

      the (calculated net of ) for outstanding at the end of the prior , determined in accordance with INSPRU 1.1.12 R; to4

   2. (b)

      the technical provisions (calculated net of reinsurance) for claims outstanding at the beginning of the prior financial year, determined in accordance with INSPRU 1.1.12 R.4

2. (2)

   If the amount of the technical provisions (calculated net of reinsurance) in (1)(a) and (b) is in both cases zero, the brought forward amount is the general insurance capital requirement (GICR) for the prior financial year, multiplied, if the ratio is less than one, by the ratio (expressed as a percentage) of:4

   4
   1. (a)

      the technical provisions (calculated gross of reinsurance) for claims outstanding at the end of the prior financial year, determined in accordance with INSPRU 1.1.12 R; to4

   2. (b)

      the technical provisions (calculated gross of reinsurance) for claims outstanding at the beginning of the prior financial year, determined in accordance with INSPRU 1.1.12 R.4

3. (3)

   If the amount of the technical provisions (calculated gross of reinsurance) in (2)(a) and (b) is in both cases zero, the brought forward amount is the general insurance capital requirement (GICR) for the prior financial year. 4

The reinsurance ratio referred to in INSPRU 1.1.45R (2) and INSPRU 1.1.47R (2) is:

1. (1)

   if the ratio lies between 50% and 100%, the ratio (expressed as a percentage) of:

   1. (a)

      the claims incurred (net of reinsurance) in the financial year in question and the two previous financial years; to

   2. (b)

      the gross claims incurred in that three-year period;

2. (2)

   50%, if the ratio calculated in (a) and (b) of (1) is 50% or less; and

3. (3)

   100%, if the ratio calculated in (a) and (b) of (1) is 100% or more.

For the purpose of INSPRU 1.1.45 R, the gross adjusted premiums amount is the higher of the gross written premiums and gross earned premiums (as adjusted in accordance with INSPRU 1.1.66 R) for the financial year in question, adjusted by:

1. (1)

   except for a pure reinsurer which became a firm in run-off before 31 December 2006 and whose Part IV permission has not subsequently been varied to add back the regulated activity of effecting contracts of insurance, increasing by 50% the amount included in respect of the premiums for general insurance businessclasses 11, 12 and 13;

2. (2)

   deducting 66.7% of the premiums for actuarial health insurance that meets the conditions set out in INSPRU 1.1.72 R; and

3. (3)

   multiplying the resulting figure by 12 and dividing by the number of months in the financial year. For the purposes of this calculation, the number of months in the financial year is the number of complete calendar months in the financial year plus any fractions of a month at the beginning and the end of the financial year.

For the purpose of INSPRU 1.1.47 R and subject to INSPRU 1.1.62 R, the gross adjusted claims amount is the amount of gross claims incurred (as determined in accordance with INSPRU 1.1.66 R) over the reference period (as specified in INSPRU 1.1.63 R) and adjusted by:

1. (1)

   except for a pure reinsurer which became a firm in run-off before 31 December 2006 and whose Part IV permission has not subsequently been varied to add back the regulated activity of effecting contracts of insurance, increasing by 50% the amount included in respect of the claims incurred for 11, 12 and 13;

2. (2)

   deducting 66.7% of the claims for actuarial health insurance that meets the conditions set out in INSPRU 1.1.72 R; and

3. (3)

   multiplying the resulting figure by 12 and dividing by the number of months in the reference period. For the purposes of this calculation, the number of months in the reference period is the number of complete calendar months in the reference period plus any fractions of a month at the beginning and the end of the reference period.

For the purposes of INSPRU 1.1.47 R, in relation to general insurance businessclass 18, the amount of claims incurred used to calculate the gross adjusted claims amount must be the amount of costs recorded in the firm's books in the reference period as borne by the firm (whether or not borne in the reference period) in respect of the assistance given.

1. (1)

   Except in those cases where paragraph (2) applies, the reference period to be used in INSPRU 1.1.60 R and INSPRU 1.1.62 R must be:

   1. (a)

      the financial year in question and the two previous financial years; or

   2. (b)

      the period the firm had been in existence at the end of the financial year in question, if shorter.

2. (2)

   In the case of a firm which underwrites only one or more of the general insurance business risks of credit, storm, hail or frost (including other business written in connection with such risks), the reference period to be used must be:

   1. (a)

      the financial year in question and the six previous financial years; or

   2. (b)

      the period the firm had been in existence at the end of the financial year in question, if shorter.

For the purposes of INSPRU 1.1.54 R, INSPRU 1.1.56 R, INSPRU 1.1.60 R and INSPRU 1.1.62 R, amounts of premiums and claims must be:

1. (1)

   determined in accordance with the insurance accounts rules or the Friendly Societies (Accounts and Related Provisions) Regulations 1994, as appropriate; and

2. (2)

   adjusted for transfers that were approved by the relevant authority (or became effective where approval by an authority was not required) before the end of the financial year in question:

   1. (a)

      to exclude any amount included in, or adjustment made to, premiums and claims to reflect the consideration for a transfer of contracts of insurance to or from the firm;

   2. (b)

      to exclude premiums and claims which arose from contracts of insurance that have been transferred by the firm to another body; and

   3. (c)

      to account for premiums and claims which arose from contracts of insurance that have been transferred to the firm from another body as if they were receivable by or payable by2 the firm.

Where there has been a significant change in the business portfolio of the firm since the end of the financial year in question, for example, a line of business has been transferred to another firm, or the firm no longer carries on a particular class of insurance business, the gross adjusted premiums amount and the gross adjusted claims amount must both be recalculated to take into account the impact of this change. The recalculation must take into account the requirements of the insurance accounts rules or the Friendly Societies (Accounts and Related Provisions) Regulations 1994, as appropriate.

The conditions referred to in INSPRU 1.1.56R (2) and INSPRU 1.1.60R (2) are that:

1. (1)

   the health insurance is underwritten on a similar technical basis to that of life insurance;

2. (2)

   the premiums paid are calculated on the basis of sickness tables according to the mathematical method applied in insurance;

3. (3)

   a provision is set up for increasing age;

4. (4)

   an additional premium is collected in order to set up a safety margin of an appropriate amount;

5. (5)

   it is not possible for the firm to cancel the contract after the end of the third year of insurance; and

6. (6)

   the contract provides for the possibility of increasing premiums or reducing payments even for current contracts.

2A firm carrying on general insurance business, other than a non-directive insurer, must calculate the amount of its ECR.

2A firm to which INSPRU 1.1.72B R applies must calculate its ECR in respect of its general insurance business as the sum of:

1. (1)

   the asset-related capital requirement; and

2. (2)

   the insurance-related capital requirement; less

3. (3)

   the firm'sequalisation provisions.

A firm must calculate its insurance-related capital requirement in accordance with INSPRU 1.1.77 R.

1. (1)

   The value of:

   1. (a)

      the net written premiums; and

   2. (b)

      the technical provisions;

   in respect of each class of business listed in the table in INSPRU 1.1.79 R must be multiplied by the corresponding capital charge factor.

2. (2)

   If any amount which is to be multiplied by a capital charge factor is a negative amount, that amount shall be treated as zero.

3. (3)

   The amounts resulting from multiplying the net written premiums in respect of each such class of business by the corresponding capital charge factor must be aggregated.

4. (4)

   The amounts resulting from multiplying the technical provisions in respect of each such class of business by the corresponding capital charge factor must be aggregated.

5. (5)

   The insurance-related capital requirement is the sum of the amounts calculated in accordance with (3) and (4).

In INSPRU 1.1.77 R references to technical provisions comprise:

1. (1)

   outstanding claims;

2. (2)

   provisions for incurred but not reported (IBNR) claims;

3. (3)

   provisions for incurred but not enough reported (IBNER3) claims;

4. (4)

   unearned premium reserves less deferred acquisition costs; and

5. (5)

   unexpired risk reserves;

in each case net of reinsurance receivables.

The insurance death risk capital component is the aggregate of the amounts which represent the fractions specified by INSPRU 1.1.82 R of the capital at risk, defined in INSPRU 1.1.83 R, for each category of contracts of insurance (as specified in INSPRU 1.1.81A R), in respect of those contracts where the capital at risk is not a negative figure, multiplied by the higher of:

1. (1)

   50%; and

2. (2)

   the ratio as at the end of the financial year in question of:

   1. (a)

      the aggregate capital at risk in respect of that category of contracts net of reinsurance cessions; to

   2. (b)

      the aggregate capital at risk in respect of that category of contracts gross of reinsurance cessions.

For the purpose of INSPRU 1.1.81 R, the categories of contracts of insurance are as follows:

1. (1)

   contracts which fall in long-term insurance businessclasses I, II or IX; and

2. (2)

   contracts which fall in long-term insurance businessclasses III, VII or VIII.

For the purpose of INSPRU 1.1.81 R, the fraction is:

1. (1)

   for long-term insurance businessclasses I, II and IX, except for a pure reinsurer:

   1. (a)

      0.1% for temporary insurance on death where the original term of the contract is three years or less;

   2. (b)

      0.15% for temporary insurance on death where the original term of the contract is five years or less but more than three years; and

   3. (c)

      0.3% in any other case;

2. (2)

   0.3% for long-term insurance businessclasses III, VII and VIII, except for a pure reinsurer; and

3. (3)

   0.1% for a pure reinsurer.

For the purpose of INSPRU 1.1.81 R, the capital at risk is:

1. (1)

   where the benefit under a contract of insurance payable as a result of death includes periodic or deferred payments, the present value of the benefits payable; and

2. (2)

   in any other case, the amount payable as a result of death;

less, in either case, the mathematical reserves for the contract.

INSPRU 1.1.81 R does not apply to:

1. (1)

   a pure reinsurer; or

2. (2)

   a mixed insurer;

in respect of life protection reinsurance business.

The insurance health risk and life protection reinsurance capital component is the highest of:

1. (1)

   the premiums amount (determined in accordance with INSPRU 1.1.45 R);

2. (2)

   the claims amount (determined in accordance with INSPRU 1.1.47 R); and

3. (3)

   the brought forward amount (determined in accordance with INSPRU 1.1.51 R); in respect of:

   1. (a)

      contracts of insurance falling in long-term insurance businessclass IV (see INSPRU 1.1.86 R);

   2. (b)

      risks falling in general insurance businessclasses 1 or 2 that are written as part of a long-term insurance contract; and

   3. (c)

      in the case of a pure reinsurer or a mixed insurer, life protection reinsurance business.

For the purposes of INSPRU 1.1.85 R, in the case of contracts of insurance falling in long-term insurance businessclass IV, condition (3) as set out in INSPRU 1.1.72 R (actuarial health insurance) is modified to: "either the reserves include a provision for increasing age, or the business is conducted on a group basis.".

The insurance expense risk capital component is:

1. (1)

   in respect of long-term insurance businessclasses III, VII and VIII, an amount equivalent to 25% of the net administrative expenses in the financial year in question relevant to the business of each of those classes, in so far as the firm bears no investment risk and the allocation to cover management expenses in the contract of insurance does not have a fixed upper limit which is effective as a limit for a period exceeding 5 years from the commencement of the contract;

2. (2)

   in respect of any tontine (long-term insurance businessclass V), 1% of the assets of the tontine;

3. (3)

   in the case of any other long-term insurance business, 1% of the "adjusted mathematical reserves" (as defined in INSPRU 1.1.89A R).

INSPRU 1.1.88 R does not apply to:

1. (1)

   a pure reinsurer; or

2. (2)

   a mixed insurer;

in respect of:

1. (a)

   life protection reinsurance business; or

2. (b)

   permanent health reinsurance business.

The insurance market risk capital component is 3% of the "adjusted mathematical reserves" (as defined in INSPRU 1.1.89A R) for all insurance liabilities except those of a kind which:

1. (1)

   arise from contracts of insurance falling in long-term insurance businessclasses III, VII or VIII to the extent that the firm does not bear any investment risk; or

2. (2)

   arise from contracts of insurance falling in long-term insurance businessclass V; or

3. (3)

   for a pure reinsurer or a mixed insurer, arise from contracts of insurance falling within:

   1. (a)

      its life protection reinsurance business; or

   2. (b)

      its permanent health reinsurance business.

1. (1)

   For the purpose of INSPRU 1.1.88 R and INSPRU 1.1.89 R, the "adjusted mathematical reserves" is the aggregate of the amounts which result from the performance of the calculation in INSPRU 1.1.90 R for each category of insurance liability specified in (2).

2. (2)

   The categories of insurance liability referred to in (1) are:

   1. (a)

      for the purpose of INSPRU 1.1.88 R, those categories described in INSPRU 1.1.91R (1), (2), (3), (4) and (5); and

   2. (b)

      for the purpose of INSPRU 1.1.89 R, those categories described in INSPRU 1.1.91R (1), (2), (4) and (5).

The calculation referred to in INSPRU 1.1.89AR (1) is the multiplication of the amount of the mathematical reserves (gross of reinsurance cessions) in respect of a category of insurance liability by the higher of:

1. (1)

   85% or, in the case of a pure reinsurer, 50%; and

2. (2)

   the ratio as at the end of the financial year in question of:

   1. (a)

      the mathematical reserves in respect of that category of insurance liability net of reinsurance cessions; to

   2. (b)

      the mathematical reserves in respect of that category of insurance liability gross of reinsurance cessions.

For the purpose of INSPRU 1.1.89A R and INSPRU 1.1.90 R, the categories of insurance liability are as follows:

1. (1)

   liabilities of a kind which arise from contracts of insurance falling in long-term insurance businessclasses I, II or IX;

2. (2)

   liabilities of a kind which arise from contracts of insurance falling in long-term insurance businessclasses III, VII or VIII to the extent that the firm bears an investment risk;

3. (3)

   liabilities of a kind which arise from contracts of insurance falling in long-term insurance businessclasses III, VII or VIII to the extent that the firm bears no investment risk and where the allocation to cover management expenses in the contract of insurance has a fixed upper limit which is effective as a limit for a period exceeding 5 years from the commencement of the contract;

4. (4)

   liabilities of a kind which arise from contracts of insurance falling in long-term insurance businessclass IV; and

5. (5)

   liabilities of a kind which arise from contracts of insurance falling in long-term insurance businessclass VI.

A firm must not treat any amounts recoverable from an ISPV as reinsurance for the purposes of the calculation of:

1. (1)

   the reinsurance ratio in accordance with INSPRU 1.1.54 R; or

2. (2)

   the insurance death risk capital component in accordance with INSPRU 1.1.81 R; or

3. (3)

   the "adjusted mathematical reserves" in accordance with INSPRU 1.1.90 R.

INSPRU 1.1 applies to the Society in accordance with INSPRU 8.1.2 R.

The following rules and guidance apply to managing agents in accordance with INSPRU 8.1.4 R:

1. (1)

   5INSPRU 1.1.12 R5 to INSPRU 1.1.20 R (except INSPRU 1.1.12R (1)3);

   3
2. (2)

   INSPRU 1.1.42 G to INSPRU 1.1.43 G; and

3. (3)

   INSPRU 1.1.74 G to INSPRU 1.1.80 G.

The Society must calculate the brought forward amount for the members in aggregate in accordance with INSPRU 1.1.51 R, using the result of GENPRU 2.3.6 R for the prior financial year and the aggregate of all members'technical provisions for the relevant periods.

For the purposes of INSPRU 1.1.66 R and further to that rule, in the case of Lloyd's members, amounts of premiums and claims must be adjusted for approved reinsurance to close to exclude any amount included in, or adjustment made to, premiums and claims to reflect the consideration for an approved reinsurance to close.