INSPRU 2.2 Asset-related Capital Requirement

INSPRU 2.2 applies to an insurer unless it is:

1. (1)

   a non-directive friendly society; or

2. (2)

   a Swiss general insurer; or

3. (3)

   an EEA-deposit insurer; or

4. (4)

   an incoming EEA firm; or

5. (5)

   an incoming Treaty firm.

INSPRU 2.2 applies to a firm only in relation to its general insurance business.

A firm must calculate its asset-related capital requirement in accordance with INSPRU 2.2.11 R.

1. (1)

   The value of each of the firm's assets of a kind listed in the table in INSPRU 2.2.16 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)

   No account shall be taken of:

   1. (a)

      the value of any asset which is not an admissible asset;

   2. (b)

      the amount (if any) by which the value of any assets exceeds the limits on exposures to a type of asset or counterparty as set out in INSPRU 2.1.22 R.

4. (4)

   Where a firm has entered into a derivative, then for the purposes of applying the appropriate capital charge factor as set out in INSPRU 2.2.16 R, it must treat the value of the derivative and the value of the asset associated with the derivative as a single asset of a type and value which most closely reflects the economic risk to the firm of the combined rights and obligations associated with the derivative and the asset associated with the derivative.

5. (5)

   The amounts resulting from multiplying each of the asset items referred to in (1) by the corresponding capital charge factor must be aggregated.

6. (6)

   The asset-related capital requirement is the amount resulting from the aggregation in (5).

1. (1)

   The asset-related capital charge factor for money market funds set out in the Table INSPRU 2.2.16 R must be applied to exposures to funds that meet the definition in (2).

2. (2)

   In INSPRU 2.2 an investment in a money market fund means a participation in a collective investment scheme which satisfies the following conditions:

   1. (a)

      the primary investment objective of the collective investment scheme is:

      1. (i)

         to maintain the net asset value of the collective investment scheme constant at par (net of earnings); or

      2. (ii)

         to maintain the net asset value of the collective investment scheme at the value of investors' initial capital plus earnings;

   2. (b)

      in order to pursue its primary investment objective the collective investment scheme invests exclusively in cash or in short term instruments with characteristics similar to cash or both; and

   3. (c)

      the collective investment scheme undertakes to abide by the following conditions:

      1. (i)

         not to allow the assets held in the collective investment scheme to exceed a weighted average maturity of 60 days;

      2. (ii)

         not to invest in equity or securities with characteristics similar to equity; and

      3. (iii)

         on a basis of marking-to-market at least weekly, not to permit the value of each collective investment scheme unit at any point in time to move by more than 50 basis points (0.5% of total collective investment scheme value).

In INSPRU 2.2.16 R an insurance dependant means a regulated related undertaking which is an insurance undertaking or an insurance holding company.

INSPRU 2.2 applies to managing agents and to the Society in accordance with:

1. (1)

   for managing agents, INSPRU 8.1.4 R; and

2. (2)

   for the Society, INSPRU 8.1.2 R

This chapter applies to the Society for each member, including the capital charge relating to central assets, to the extent that those assets are held to support a particular member.