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SUP App 2.13 Obligations on firms which have previously submitted a scheme of operations

SUP App 2.13.1R

A firm which has submitted a scheme of operations to the FSA, whether required by SUP App 2.4, SUP App 2.5 or SUP App 2.8, or as part of an application under SUP 6.3 (see SUP 6.3.25 G), SUP 6.4 (see SUP 6 Annex 4), AUTH 3.9 (see AUTH 3.9.9 G (1)) or SUP 11.5 (see SUP 11.5.5 G), or an amended scheme of operations, must during the period covered by that scheme of operations:

  1. (1)

    notify the FSA at least 28 days before entering into or carrying out any material transaction with, or in respect of, an associate, unless that transaction is in accordance with a scheme of operations which has been submitted to the FSA;

  2. (2)

    submit a quarterly financial return to the FSA which must include for, or as at the end of, each quarter:

    1. (a)

      a summary profit and loss account prepared in accordance with SUP App 2.12.7 R;

    2. (b)

      a summary balance sheet prepared in accordance with SUP App 2.12.8 R; and

    3. (c)

      a statement of capital resources prepared in accordance with SUP App 2.12.9 R;

    and which must identify and explain differences between the actual results and the forecasts submitted in the scheme of operations; and

  3. (3)

    notify the FSA promptly of any matter which has either happened or is likely to happen and which represents a significant departure from the scheme of operations; the firm must either:

    1. (a)

      explain the nature of the departure and the reasons for it and provide revised forecast financial information in the scheme of operations for its remaining term; or

    2. (b)

      include an amended scheme of operations and explain the amendments and the reasons for them.

SUP App 2.13.2R

A report under SUP App 2.13.1R (2) must be submitted in accordance with the rules in SUP 16.3.6R to SUP 16.3.13R.

SUP App 2.13.3G

For the purpose of SUP App 2.13.1R (1), the FSA considers that transactions with, or in respect of, associates include:

  1. (1)

    contracting (as either party), advancing, repaying, writing off or agreeing to change the terms of any loan;

  2. (2)

    entering into (in any capacity), releasing, calling upon or agreeing to change the terms of any guarantee, pledge, security, charge or any off-balance-sheet transaction;

  3. (3)

    entering into agreements to acquire or dispose of property or which otherwise affect the nature or value of the firm's assets;

  4. (4)

    making an investment (directly or indirectly) in an associate;

  5. (5)

    entering into (as either party), commuting or agreeing to change the terms of, any contract of reinsurance; and

  6. (6)

    entering into, or changing the terms of, any agreement to give or provide services or to share costs.

SUP App 2.13.4G

The FSA considers that a significant departure referred to in SUP App 2.13.1R (3) includes:

  1. (1)

    entry or withdrawal from a line of insurance business;

  2. (2)

    significant revision of the firm's strategy for managing risks, in particular the basis upon which risks are reinsured;

  3. (3)

    forecast premiums being exceeded, by more than 10%, for a single financial year (or part year if the period covered by the scheme of operations is or includes part of a financial year);

  4. (4)

    claims experience being significantly worse than forecast for a single financial year (or part year if the period covered by the scheme of operations is or includes part of a financial year);

  5. (5)

    the actual level of capital resources being significantly worse than forecast;

  6. (6)

    paid or proposed dividends being greater than those forecast; and

  7. (7)

    any other transaction or circumstance which is likely to have a material effect upon available assets (as defined in IPRU(INS) 11.1).