Related provisions for GENPRU 1.2.27
1 - 20 of 70 items.
The rules in GENPRU 1.2 require a firm to identify and assess risks to its being able to meet its liabilities as they fall due, to assess how it intends to deal with those risks and to quantify the financial resources it considers necessary to mitigate those risks. To meet these requirements, a firm should consider:(1) the extent to which capital is an appropriate mitigant for the risks identified; and(2) assess the amount and quality of capital required.
Where a firm is carrying out an assessment of the adequacy of its overall financial resources in accordance with GENPRU 1.2, the assessment of the adequacy of the firm's capital resources must:(1) reflect the firm's assets, liabilities, intra-group arrangements and future plans; (2) be consistent with the firm's management practice, systems and controls;(3) consider all material risks that may have an impact on the firm's ability to meet its liabilities to policyholders; and(4)
The ICA should reflect both the firm's desire to fulfil its business objectives and its responsibility to meet liabilities to policyholders. This means that the ICA should demonstrate that the firm holds sufficient capital to be able to make planned investments and take on new business (within an appropriate planning horizon). It should also ensure that if the firm had to close to new business (if it has not already done so), it would be able to meet its existing commitments.
Where a firm's liabilities include payments which are subordinated to liabilities to policyholders, these payments do not need to be included within the ICA. However, the ICA should include all payments that must be made to avoid putting policyholders' interests at risk, including any payment on which a default might trigger the winding up of the firm. For example, if the principal of a loan could be recalled on default of a coupon payment, coupon payments over the lifetime of
The assets that a firm holds will include assets to back both the liabilities and any capital requirement. These assets carry risk, both in their own right and to the extent that they do not match the liabilities that they are backing. The risk associated with these assets should be considered over the full term for which the firm expects to carry the liabilities.
The methods and assumptions used in valuing the liabilities should contain no explicit margins for risk, nor should the approach be optimistic. The valuation of liabilities should be consistent with the valuation of assets. To the extent the market price includes an implicit allowance for risk, this should be included within the valuation.
In giving individual capital guidance, the FSA seeks a balance between delivering consistent outcomes across the individual capital guidance it gives to all firms and recognising that such guidance should reflect the individual features of the firm. Comparison with the assumptions used by other firms will be used to trigger further enquiry. Debate will be sought where good arguments are made for a particular result that differs markedly from those of a firm's peers. The FSA also
(1) The winding up of an ICVC may be carried out under this section instead of by the court provided the ICVC is solvent and the steps required under regulation 21 the OEIC Regulations (The Authority's approval for certain changes in respect of a company) are fulfilled. This section lays down the procedures to be followed and the obligations of the ACD and any other directors of the ICVC. (2) The termination of a sub-fund under this section will be subject to the conditions set
In this section, where a sub-fund of an ICVC is being terminated, references to:(1) units, are references to units of the class or classes related to the sub-fund to be terminated;(2) a resolution, or extraordinary resolution, are references to such a resolution passed at a meeting of unitholders of units of the class or classes referred to in (1); (3) scheme property, are references to the scheme property allocated or attributable to the sub-fund to be terminated; and(4) liabilities,
(1) An ICVC must not be wound up except under this section or as an unregistered company under Part V of the Insolvency Act 1986.(2) An ICVC must not be wound up under this section if there is a vacancy in the position of ACD. (3) An ICVC must not be wound up or a sub-fund terminated under this section: (a) unless and until effect may be given, under regulation 21 of the OEIC Regulations, to proposals to wind up the affairs of the ICVC or to proposals to make the alterations to
(1) Before notice is given to the FSA under regulation 21 of the OEIC Regulations of the proposals referred to in COLL 7.3.4 R (3), the directors must make a full enquiry into the ICVC's affairs to determine whether the ICVC will be able to meet all its liabilities. (2) The ACD must then, based on the results of this enquiry, prepare a statement either: (a) confirming that the ICVC will be able to meet all its liabilities within twelve months of the date of the statement; or(b)
(1) Paragraphs (2) to (9) of this rule apply to winding up an ICVC and termination of a sub-fund, paragraph (10) only applies to the winding up of an ICVC and paragraphs (11) to (15) only apply to the termination of a sub-fund of an ICVC.(2) The ACD must, as soon as practicable after winding up or termination has commenced, cause the scheme property to be realised and the liabilities of the ICVC or the sub-fund to be met out of the proceeds.(3) The ACD must instruct the depositary
(1) The ACD must use all reasonable endeavours to ensure that all the liabilities of the ICVC are discharged before the completion of the winding up or termination.(2) The duty in (1) relates to all liabilities of which the ACD: (a) is, or becomes, aware before the completion of the winding up or termination; or(b) would have become aware before the completion of the winding up or termination had it used all reasonable endeavours to ascertain the liabilities. (3) If the ACD rejects
(1) Except to the extent that the ACD can show that it has complied with COLL 7.3.9 R (Duty to ascertain liabilities), the ACD:(a) is personally liable to meet any liability of an ICVC, of which it is the ACD, wound up under this section (whether or not the ICVC has been dissolved); and(b) must keep the ICVC indemnified against any liability allocated or attributable to a sub-fund that has been terminated under these rulesthat was not discharged before the completion of the winding
(1) If: (a) during the course, or as a result, of the enquiry referred to in COLL 7.3.5 R (1) (Solvency statement), the directors become of the opinion that it will not be possible to provide the confirmation referred to in (2)(a) of that rule; or(b) after winding up or termination has commenced, the ACD becomes of the opinion that the ICVC will be unable to meet all its liabilities within twelve months of the date of the statement provided under (a) of COLL 7.3.5 R (2); the directors
This section sets out requirements for a firm relating to 'internal-contagion risk'. This is the risk that losses or liabilities from one activity might deplete or divert financial resources held to meet liabilities from another activity. It arises where the two activities are carried on within the same firm. It may also arise from the combination of activities within the same group, but this aspect of internal-contagion risk falls outside the scope of this section. Requirements
INSPRU 1.5.18 R, INSPRU 1.5.21 R, INSPRU 1.5.30 R and INSPRU 1.5.31 R require a firm to identify the assets attributable to the receipts of the long-term insurance business, called long-term insurance assets, and only to apply those assets for the purpose of that business. This has the effect of prohibiting a composite firm from using long-term insurance assets to meet general insurance liabilities. It also keeps long-term insurance assets separate from shareholder funds.
INSPRU 1.1.16 R requires a firm to establish adequate technical provisions for its long-term insurance contracts. INSPRU 1.1.20 R requires a firm to hold admissible assets of a value at least equal to the amount of the technical provisions and its other long-term insurance liabilities. INSPRU 1.1.21 R ensures that a composite firm identifies separate admissible assets with a value at least equal to the technical provisions for long-term insurance business and its other long-term
(1) A firm's long-term insurance assets are the items in (2), adjusted to take account of:(a) outgo in respect of the firm'slong-term insurance business; and(b) any transfers made in accordance with INSPRU 1.5.27 R.(2) The items are:(a) the assets identified under INSPRU 1.5.18 R (including assets into which those assets have been converted);(b) any other assets identified by the firm as being available to cover its long-term insurance liabilities;(c) premiums and other receivables
INSPRU 1.1.27 R and INSPRU 1.1.28 R provide further constraints on the transfer of assets out of a with-profits fund. INSPRU 1.1.27 R requires a firm to have admissible assets in each of its with-profits funds to cover the technical provisions and other long-term insurance liabilities relating to all the business in that fund. INSPRU 1.1.28 R requires a realistic basis life firm to ensure that the realistic value of assets for each of its with-profits funds is at least equal to
INSPRU 3.1.57 R requires a firm to cover, as closely as possible, its property-linked liabilities by the property to which those liabilities are linked. In order to comply with this rule, a firm should identify the assets it holds to cover property-linked liabilities and should not apply those assets (as long as they are needed to cover the property-linked liabilities) for any purpose other than to meet those liabilities.
A firm must select, allocate and manage the assets to which its property-linked liabilities are linked taking into account:(1) the firm's contractual obligations to holders of property-linked policies; and(2) its regulatory duty to treat customers fairly, including in the way it makes discretionary decisions as to how it selects, allocates and manages assets.
For the purposes of INSPRU 3.2.8 R, investment risk is the risk that the assets held by a firm:(1) (where they are admissible assets held by the firm to cover its technical provisions) might not be:(a) of a value at least equal to the amount of those technical provisions as required by INSPRU 1.1.20 R; or(b) of appropriate safety, yield and marketability as required by INSPRU 1.1.34R (1)(a); or(c) of an appropriate currency match as required by INSPRU 3.1.53 R;(2) (where they
In assessing whether investment risk is reduced, the impact of a transaction on both the assets and liabilities should be considered. In particular, where the amount of liabilities depends upon the fluctuations in an index or other factor, investment risk is reduced where assets whose value fluctuates in the same way match those liabilities. In appropriate circumstances this may include:(1) a derivative or quasi-derivative that is linked to the same index as the liabilities from
An obligation to pay a monetary amount (whether or not falling in INSPRU 3.2.16 R) is covered if:(1) the firm holds admissible assets that are sufficient in value so that the firm reasonably believes that following reasonably foreseeable adverse variations (relying solely on cashflows from, or from realising, those assets) it could pay the monetary amount in the right currency when it falls due; or(2) the obligation to pay the monetary amount is offset by a liability. An obligation
INSPRU 3.1 addresses the impact of market risk on insurance business in the ways set out below:(1) Any firm that carries on long-term insurance business which is a regulatory basis only life firm2must comply with the resilience capital requirement. This requires the firm to hold capital to cover market risk. The resilience capital requirement is dealt with in INSPRU 3.1.9 G to INSPRU 3.1.26 R.(2) For a firm that carries on long-term insurance business, the assets that it must
Where the assets of a firm invested in a significant territory of a kind referred to in INSPRU 3.1.23R (1), INSPRU 3.1.23R (2) or INSPRU 3.1.23R (3)(a) represent less than 0.5% of the firm'slong-term insurance assets (excluding assets held to cover index-linked liabilities or property-linked liabilities), measured by market value, the firm may assume for those assets the market risk scenario for assets of that kind invested in the United Kingdom set out in INSPRU 3.1.16 R instead
A firm must cover its index-linked liabilities with:(1) either:(a) the assets which represent that index; or(b) assets of appropriate security and marketability which correspond, as closely as possible, to the assets which are comprised in, or which form, the index or other reference of value to which those liabilities are linked; or(2) a portfolio of assets whose value or yield is reasonably expected to correspond closely with the index-linked liability; or(3) an index-linked
If a firm has incurred a policy liability which cannot be exactly matched by appropriate assets (for example the Limited Price Index (LPI)), the firm should seek to match assets that at least cover the liabilities. For example, an LPI limited to 5% per annum may be matched by an RPI bond or a fixed interest investment matching cash flows increasing at 5% per annum compound.
(1) This section deals with the circumstances and manner in which an AUT is to be wound up or a sub-fund of an AUT is to be terminated. Under section 256 of the Act (Requests for revocation of authorisation order), the manager or trustee of an AUT may request the FSA to revoke the authorisation order in respect of that AUT. Section 257 of the Act (Directions) gives the FSA the power to make certain directions.(2) The termination of a sub-fund under this section will be subject
In this section, where a sub-fund of an AUT is being terminated, references to:(1) units, are references to units of the class or classes related to the sub-fund to be terminated;(2) a resolution or extraordinary resolution, are references to such a resolution passed at a meeting of unitholders of units of the class or classes referred to in (1);(3) scheme property, are references to the scheme property allocated or attributable to the sub-fund to be terminated; and(4) liabilities,
(1) Where COLL 7.4.3 R (2) (f) applies, the trustee must wind up the AUT or terminate the sub-fund in accordance with the approved scheme of arrangement.(2) In any other case falling within COLL 7.4.3 R:(a) once the AUT falls to be wound up or sub-fund terminated, the trustee must realise the scheme property;(b) after paying out or retaining adequate provision for all liabilities payable and for the costs of the winding up or termination, the trustee must distribute the proceeds
Subject to GENPRU 1.3.9 R to GENPRU 1.3.10 R and GENPRU 1.3.36 R, except where a rule in GENPRU, BIPRU or INSPRU provides for a different method of recognition or valuation, whenever a rule in GENPRU, BIPRU or INSPRU refers to an asset, liability, exposure, equity or income statement item, a firm must, for the purpose of that rule, recognise the asset, liability, exposure, equity or income statement item and measure its value in accordance with whichever of the following are applicable:(1)
Except where a rule in GENPRU, BIPRU or INSPRU makes different provision, GENPRU 1.3.4 R applies whenever a rule in GENPRU, BIPRU or INSPRU refers to the value or amount of an asset, liability, exposure, equity or income statement item, including:(1) whether, and when, to recognise or de-recognise an asset or liability;(2) the amount at which to value an asset, liability, exposure, equity or income statement item; and(3) which description to place on an asset, liability, exposure,
Adjustments to accounting values(1) For the purposes of GENPRU and BIPRU, the adjustments in (2) and (3) apply to values calculated pursuant to GENPRU 1.3.4 R in addition to those required by GENPRU 1.3.9 R to GENPRU 1.3.10 R.(2) A BIPRU firm must not recognise either:(a) the fair value reserves related to gains or losses on cash flow hedges of financial instruments measured at amortised cost; or(b) any unrealised gains or losses on debt instruments held in the available-for-sale
An insurance business transfer scheme is defined in section 105 of the Act and the definition has been extended to transfers from members of Lloyd's to reflect the effect of the Financial Services and Markets Act 2000 (Control of Transfers of Business Done at Lloyd's) Order 2001(SI 2001/3626). With certain exclusions (relating to some schemes approved under foreign legislation, some novations of reinsurance or some captive insurers), it includes, in broad terms, any scheme to
In the opinion of the FSA, a novation or a number of novations would constitutean insurance business transfer only if their number or value were such that the novation was to be regarded as a transfer of part of the business. A novation is an agreement between the policyholder and two insurers whereby a contract with one insurer is replaced by a contract with the other. In the opinion of the FSA, where an insurer agrees to meet the liabilities (this may include undertaking the
Under section 112 of the Act, the court has wide discretion to transfer property and liabilities to the transferee and to make orders in relation to incidental, consequential and supplementary matters. In the opinion of the FSA, the court has the power in such cases and on such terms as may be appropriate, to transfer the benefit of reinsurance contracts protecting the transferred business and to make such amendments to the terms of those contracts as may be necessary to give
A firm's run-off plan should describe how the firm proposes to manage the run-off of the with-profits fund. That description should include:(1) details of the expected duration and costs of fully running off the fund's liabilities;(2) an explanation as to how a solvent run-off will be funded; and(3) details of the firm's future strategy for managing the risks associated with the run-off of the fund.
A firm's run-off plan should include an explanation of its future investment strategy, including:(1) its strategy for matching the with-profits fund's liabilities with appropriate assets; and(2) any changes it expects to make to the with-profits fund's investment strategy as a result of the closure of the with-profits fund, including any changes to the proportions of different types of investments.
These tables belong to SUP App 2.15.8 G
Table 1 - forecast summary revenue account for the relevant with-profits fund |
|
(1) |
Premiums and claims (gross and net of reinsurance) analysed by major class of insurance business |
(2) |
Investment return |
(3) |
Expenses |
(4) |
Other charges and income |
(5) |
Taxation |
(6) |
Increase (decrease) in fund in financial year |
(7) |
Fund brought forward |
(8) |
Fund carried forward |
Table 2 - forecast summary balance sheet and statement of solvency for the relevant with-profits fund |
|
Assets analysed by type (excluding implicit items): |
|
(1) |
Equities |
(2) |
Land and buildings |
(3) |
Fixed interest investments |
(4) |
All other assets |
(5) |
Total assets (excluding implicit items) |
(6) |
Policyholder liabilities |
(7) |
Other liabilities |
(8) |
Total liabilities |
(9) |
Excess/(deficiency) of assets over liabilities before implicit items |
(10) |
Implicit items allocated to the with-profits fund |
(11) |
Long-term insurance capital requirement for the with-profits fund |
(12) |
|
(13) |
With-profits insurance capital component (for realistic basis life firms only) |
(14) |
Net excess/(deficiency) of assets in the with-profits fund |
Table 3 - forecast summary balance sheet and statement of solvency for the firm |
||
L1 |
||
L2 |
||
L3 |
L1+L2 |
|
L4 |
Total long-term insurance liabilities (excluding resilience capital requirement) |
|
L5 |
Total long-term insurance fund surplus |
L3-L4 |
L6 |
Shareholder fund assets |
|
L7 |
||
L8 |
||
L9 |
Excess of regulatory assets over long-term insurance capital requirement |
L5+L6+L7-L8 |
L10 |
For realistic basis life firms only. |
|
L11 |
||
L12 |
Net excess assets |
L9-L10-L11 |
L13 |
FTSE level at which the long-term insurance capital requirement would be breached |
|
Types of reports. See SUP 6.4.15 G
Category of firm |
Type of report |
a bank or building society |
• an audited balance sheet which confirms that, in the auditor's opinion, the firm has no remaining deposit liabilities to customers; • a report from auditors or reporting accountants; |
• a report from auditors or reporting accountants |
|
an insurer |
• an audited closing balance sheet which demonstrates that the firm has no insurance liabilities to policyholders; • a report from the auditors or reporting accountants; and • in some cases, an actuarial opinion as to the likelihood of any remaining liabilities to policyholders. |
The FSA will usually not cancel a firm's Part IV permission until the firm can demonstrate that, in relation to business carried on under that permission, it has, as appropriate:(1) ceased carrying on regulated activities or fully run off or transferred all insurance liabilities;(2) repaid all client money and client deposits;(3) discharged custody assets and any other property belonging to clients; and(4) discharged, satisfied or resolved complaints against the firm.
If it is not possible for a firm to demonstrate a relevant matter referred to in SUP 6.4.19 G, for example, depositors are uncontactable, the firm will be expected to have satisfied the FSA that it has made adequate provisions for discharging any liabilities to clients which do not involve the firm carrying on regulated activities.
In deciding whether to cancel a firm'sPart IV permission, the FSA will take into account all relevant factors in relation to business carried on under that permission, including whether:(1) there are unresolved, unsatisfied or undischarged complaints against the firm from any of its customers;(2) the firm has complied with CASS 4.3.99 R and CASS 5.5.80 R (Client money: discharge of fiduciary duty) and CASS 4.3.104 R (Client money: allocated but unclaimed client money) if it has
The effect of GENPRU 2.2.116 R is that if a potential tier one instrument does constitute a liability, this should only be the case when the firm is able to pay that liability but chooses not to do so. As tier one capital resources should be undated, this will generally only be relevant on a solvent winding up of the firm. The holder should agree that the firm has no liability (including any contingent or prospective liability) to pay any amount to the extent to which that liability
A capital instrument may only be included in upper tier two capital resources if a firm's obligations under the instrument either:(1) do not constitute a liability (actual, contingent or prospective) under section 123(2) of the Insolvency Act 1986; or(2) do constitute such a liability but the terms of the instrument are such that:(a) any such liability is not relevant for the purposes of deciding whether:(i) the firm is, or is likely to become, unable to pay its debts; or(ii)
GENPRU 2.2.198 R to GENPRU 2.2.201 R apply to a tier one instrument, tier two instrument or tier three instrument of a firm that is treated as a liability under the accounting framework to which it is subject as referred to in GENPRU 1.3.4 R (General requirements: accounting principles to be applied) (a "debt instrument").
This exemption disapplies the restriction in section 21 of the Act from non-real time financial promotions or solicited real time financial promotions which are made to a person who the communicator believes on reasonable grounds to be a certified high net worth individual and which relate to certain investments. These investments must be either;(1) shares in or debentures of an unlisted company; or(2) warrants,certificates representing certain securities, options, futures or
The exemption also requires that certain warnings are given to the potential investor. In this respect, article 50(3)(d) provides that the financial promotion must state that there is a significant risk of losing all monies invested or of incurring additional liability. In the FSA's view, these are alternative statements and whichever is the relevant statement should be included. If there is no risk of incurring additional liability the statement may simply say that there is a
1(1) This exemption allows a non-real time or solicited real time financial promotion to be made to an association with a particular membership. Membership of this association must be reasonably believed to be wholly or predominantly made up of1 certified high net worth individuals, high net worth companies or unincorporated associations or trusts, or certified or self-certified1 sophisticated investors. The financial promotion must not relate to an investment under the terms
The exemption is subject to certain conditions. In broad terms, these are that the financial promotion must be accompanied by an indication:(1) that the directors or promoters of the company have taken all reasonable care to ensure that the financial promotion is true and not misleading;(2) that the directors or promoters have not limited their liability;(3) that any person who is in doubt about the investment should consult an authorised person; and(4) that:(a) the directors
If a firm ceases to be a participant firm part way through a financial year of the compensation scheme:(1) it will remain liable for any unpaid levies which the FSCS has already made on the firm; and(2) the FSCS may make a levy upon it (which may be before or after the firmhas ceased to be a participant firm, but must be before it ceases to be an authorised person) for the costs which it would have been liable to pay had the FSCS made a levy on all participant firms at the time
In determining whether a UK recognised body has financial resources sufficient for the proper performance of its relevant functions, the FSA may have regard to:(1) the operational and other risks to which the UK recognised body is exposed;(2) if the UK recognised body acts as a central counterparty or otherwise guarantees the performance of transactions in specified investments, the counterparty and market risks to which it is exposed in that capacity; (3) the amount and composition
For a transfer to another friendly society, if the conditions of 87(1) and 87(2) of the Friendly Societies Act 1992 are met a report is required from the appropriate actuary of the transferee to confirm that it will meet the required minimum margin. Where the conditions of 87(1) and 87(3) are met the FSA may require a report from the appropriate actuary of the transferee to confirm that it will have an excess of assets over liabilities.
The criteria that the FSA must use in determining whether to confirm a proposed amalgamation or transfer are set out in schedule 15 to the Friendly Societies Act 1992. These criteria include that:(1) confirmation must not be given if the FSA considers that:(a) there is a substantial risk that the successor society or transferee will be unable lawfully to carry out the engagements to be transferred to it;(b) information material to the members' decision about the amalgamation or
The FSA will not decide whether to confirm the transfer or amalgamation at the hearing. A copy of its written decision, including its findings on the points made in representations, will be sent to the society(ies) and to those making representations. It will also be available to any other person on request and may be published.
(1) A listed company in severe financial difficulty may find itself with no alternative but to dispose of a substantial part of its business within a short time frame to meet its ongoing working capital requirements or to reduce its liabilities. Due to time constraints it may not be able to prepare a circular and convene an extraordinary general meeting to obtain prior shareholder approval.(2) The FSA may modify the requirements in LR 10.5 to prepare a circular and to obtain shareholder