COBS 21

Permitted Links

COBS 21.1

Application

COBS 21.1.1

See Notes

handbook-rule

The rules in this section apply on an ongoing basis to linked long-term contracts that are effected by:

  1. (1) insurers other than EEA insurers; and
  2. (2) EEA insurers in the United Kingdom.

COBS 21.1.2

See Notes

handbook-rule

The rules in this section do not apply to:

  1. (1) contracts that were effected before 1 July 1994, and under which linked benefits were permitted to be determined before that date;
  2. (2) contracts effected by an insurer that are linked long-term contracts only because the policyholder is eligible to participate in any established surplus;
  3. (3) contracts effected by an EEA insurer that are linked long-term contracts only because the policyholder is eligible to participate in an excess of assets representing the whole or a particular part of the long-term insurance fund over the liabilities, or a particular part of the liabilities, of the insurer as determined by the law of the EEA state in which the head office of the insurer is situated;
  4. (4) [deleted]
  5. (5) contracts effected before 30 June 1995, to the extent that they provide for benefits to be determined by reference to a collective investment scheme that was a listed security immediately before 1 July 1994; and
  6. (6) contracts linked to permitted units that were effected before 1 February 1992, except to the extent that they relate to acts or omissions on or after that date.

COBS 21.2

Principles for firms engaged in linked long-term insurance business

COBS 21.2.1

See Notes

handbook-rule
A firm must ensure that the values of its permitted links are determined fairly and accurately.

COBS 21.2.2

See Notes

handbook-rule

A firm must ensure that its linked assets:

  1. (1) are capable of being realised in time for it to meet its obligations to linked policyholders; and
  2. (2) are matched with its linked liabilities as required by the close matching rules.

COBS 21.2.3

See Notes

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A firm must ensure that there is no reasonably foreseeable risk that the aggregate value of any of its linked funds will become negative.

COBS 21.2.5

See Notes

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A firm must ensure that its systems and controls and other resources are appropriate for the risks associated with its linked assets and linked liabilities.

COBS 21.2.6

See Notes

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  1. (1) A firm must ensure when selecting linked assets that there is no reasonably foreseeable risk of a conflict of interest with its linked policyholders.
  2. (2) If a conflict does arise, the firm must take reasonable steps to ensure that the interests of the linked policyholders are safeguarded.

COBS 21.2.7

See Notes

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In applying the rules in this section, a firm must consider the economic effect of its permitted links and linked assets ahead of their legal form.

COBS 21.2.8

See Notes

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A firm must notify the appropriate regulator in writing as soon as it becomes aware of any failure to meet the requirements of this section.

COBS 21.3

Rules for firms engaged in linked long-term insurance business

COBS 21.3.5

See Notes

handbook-rule
  1. (1) Except in the case specified in (2), a firm which proposes to undertake linked long-term insurance business, which is linked to the average earnings index and used for the purposes of orders made by the Department for Work and Pensions under section 148 of the Social Security Administration Act 1992, must notify the appropriate regulator in writing of its intention to do so in good time before effecting any such business for the first time, or if there is a material change in the volume of such business, and explain how the risks associated with this business will be safely managed.
  2. (2) These requirements do not apply in respect of liabilities for which a limited revaluation premium has been paid to the Department for Work and Pensions so that the liability for revaluation, while still linked to orders made under section 148 of the Social Security Administration Act 1992, is limited to 5%.