Prudential Regulation Authority Rulebook

accepting deposits

accounting principles

means in the case of:

1. a firm which is a company, the applicable accounting requirements for the company concerned specified in Part 15 of the Companies Act 2006 or in any provision made under that Act;
2. an overseas firm, the accounting requirements as would be applicable if that firm was a company with its registered or head office in the UK; or
3. any other firm, the applicable accounting requirements for the type of firm concerned as specified in any relevant legislation;

and for this purpose ‘accounting requirements’ means accounting requirements for the purposes of external financial reporting and ‘company’ has the same meaning as in section 1(1) of the Companies Act 2006.

accounting reference date

(1) in relation to a company incorporated in the UK under the Companies Acts, means the accounting reference date of that company determined in accordance with section 391 of the Companies Act 2006; and
(2) in relation to any other body, means the last day of its financial year.

Accounts Directives

means Council Directives 2013/34/EC, 91/674/EEC and 83/349/EEC.

Accounts Regulations

means the Friendly Society (Accounts and Related Provisions) Regulations 1994.

accumulating with-profits policies

means a with-profits policy which has a readily identifiable current benefit, whether or not this benefit is currently realisable, which is adjusted by an amount explicitly related to the amount of any premium payment and to which additional benefits are added in respect of participation in profits by additions directly related to the current benefit, or a policy with similar characteristics.

actuarial body

means the Institute and Faculty of Actuaries.

actuarial health insurance

means health insurance which meets all the conditions set out in Insurance Company – Capital Resources Requirements 13.1.

actuarial investigation

means an investigation to which Insurance Company – Reporting 5.8 – 5.12 applies.

actuarial valuation date

means the date as which the mathematical reserves are calculated.

actuary

means a fellow of an actuarial body or (in connection with general insurance business) a Fellow of the Casualty Actuarial Society who is a member of an actuarial body.

administering a benchmark

means the regulated activity specified in article 63S of the Regulated Activities Order.

admissible assets

(1) (in relation to an insurer which is not a pure reinsurer) has the meaning in Insurance Company – Capital Resources 13; or

(2) (in relation to a pure reinsurer) means an asset the holding of which is consistent with compliance by the firm with Insurance Company – Risk Management 5.

admission to trading

means the process by which the exchange permits members of the exchange to enter into transactions in that investment under and subject to the rules of the exchange.

advising on investments

means the regulated activity, specified in article 53 of the Regulated Activities Order (Advising on investments).

advising on pension transfers and pension opt-outs

means advising on investments in respect of pension transfers and pension opt-outs.

affected market participant

has the meaning given in regulation 2(1) of The Insurers (Reorganisation and Winding Up) (Lloyd’s) Regulations 2005 (2005/1998).

affiliated company

means (in relation to a person) an undertaking in the same group as that person.

agreeing to carry on a regulated activity

means the regulated activity, specified in article 64 of the Regulated Activities Order (Agreeing to carry on specified kinds of activity).

AIF

means an alternative investment fund.

AIFM

means alternative investment fund manager.

AIFM investment management functions

means investment management functions of an AIFM as set out in 1(a) (portfolio management) or (b) (risk management) of Annex I to AIFMD.

AIFMD

means Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010.

aircraft

means the class of contract of insurance, specified in paragraph 5 of Part I of Schedule 1 to the Regulated Activities Order.

aircraft liability

means the class of contract of insurance, specified in paragraph 11 of Part I of Schedule 1 to the Regulated Activities Order.

alternative investment fund

The changes to this defined term are effective from 23:00 on 31/12/2020.

means a collective investment undertaking, including investment compartments thereof which:

(1) raises capital from a number of investors, with the intention of investing it in accordance with a defined investment policy for the benefit of those investors; and

(2) does not require authorisation pursuant to article 5 of the UCITS Directive.

alternative investment fund manager

The changes to this defined term are effective from 23:00 on 31/12/2020.

means a legal person whose regular business is managing one or more alternative investment funds.

analogous non-reinsurance financing agreement

means analogous non-reinsurance financing agreements, including 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.

ancillary activity

means an activity which is not a regulated activity but which is:

(1) carried on in connection with a regulated activity; or

(2) held out as being for the purposes of a regulated activity.

ancillary insurance services undertaking

(1) (in the Financial Conglomerates Part of the PRA Rulebook) has the meaning given in Financial Conglomerates 1.4;

(2) (in relation to the Group Supervision Part of the PRA Rulebook) means, in relation to any undertaking in a group, an undertaking complying with the following conditions:

(a) its principal activity consists of:

(i) owning or managing property;

(ii) managing data-processing services;

(iii) providing health and care services; or

(iv) any other similar activity;

(b) the activity in (a) is ancillary to the principal activity of one or more insurance undertakings; and

(c) those insurance undertakings are also members of that group.

ancillary own funds

The changes to this defined term are effective from 23:00 on 31/12/2020.

(1) (in relation to a UK Solvency II firm and Lloyd’s) has the meaning given in Own Funds 2.3 and are determined in accordance with Own Funds 2.3 to 2.7; or

(2) (in relation to an insurance holding company) means an own funds item referred to in Article 89 of the Solvency II Directive, determined in accordance with (1) as if it were a UK Solvency II firm; or

(3) (in relation to a third country branch undertaking) means an own funds item referred to in Article 89 of the Solvency II Directive, determined in accordance with (1) as if it were a UK Solvency II firm.

ancillary service

The changes to this defined term are effective from 23:00 on 31/12/2020.

means any of the services listed in Part 3A of Schedule 2 to the Regulated Activities Order.

ancillary services undertaking

means an undertaking, the principal activity of which consists of owning or managing property, managing data-processing services, or a similar activity which is ancillary to the principal activity of one or more credit institutions, investment firms or insurers.

Annex II benchmark administrator

has the meaning given in the Glossary to the FCA Handbook.

annual report and accounts

means

(1) (in relation to a company incorporated in the UK) an annual report and annual accounts as those terms are defined in section 471 of the Companies Act 2006 together with an auditor's report prepared in relation to those accounts under sections 495 to 497A of the same Act;
(2) (in relation to any other body) any similar or analogous documents which it is required to prepare whether by its constitution or by the law under which it is established.

appointed representative

has the meaning given in s39(2) FSMA.

approved counterparty

means any of the following:

(1) an approved credit institution;

(2) a firm whose permission including dealing in investments as principal with respect to derivatives which are not listed;

(3) a MiFID investment firm whose authorisation (as referred to in Article 5 of MiFID II) authorises it to carry on activities of the kind referred to in (2); or

(4) in respect of a transaction involving a new issue of securities which are to be listed, the issuer or a MiFID investment firm acting on behalf of the issuer.

approved credit institution

The changes to this defined term are effective from 23:00 on 31/12/2020.

means a credit institution recognised or permitted under the law of the UK to carry on any of the activities set out in Annex 1 to the CRD.

approved derivative

means a derivative in respect of which the conditions in Insurance Company – Risk Management 6.2 are met.

approved financial institution

The changes to this defined term are effective from 23:00 on 31/12/2020.

means any of the following:

(1) the European Central Bank;

(2) the central bank of an EEA State;

(3) the International Bank for Reconstruction and Development;

(4) the European Bank for Reconstruction and Development;

(5) the International Finance Corporation;

(6) the International Monetary Fund;

(7) the Inter-American Development Bank;

(8) the African Development Bank;

(9) the Asian Development Bank;

(10) the Caribbean Development Bank;

(11) the European Investment Bank;

(12) the EU;

(13) the European Atomic Energy Community; and

(14) the Bank of England.

approved person

means a person in relation to whom the FCA or the PRA has given its approval under section 59 of FSMA (Approval for particular arrangements) for the performance of a controlled function.

approved quasi-derivative

means a quasi-derivative in respect of which the conditions in Insurance Company – Risk Management 6.2 are met.

approved reinsurance to close

means;

(1) a reinsurance to close effected before 1 January 2005; or

(2) an agreement under which members of a syndicate in one syndicate year ("the reinsured members") agree with the members of that syndicate in a later syndicate year or the members of one other syndicate ("the reinsuring members") that the reinsuring members will discharge, or procure the discharge of, or indemnify the reinsured members against, all known and unknown insurance business liabilities of the reinsured members arising out of the insurance business carried on by the reinsured members in that syndicate year that is:

(a) effected after 1 January 2005; and

(b) not a balance transfer between two syndicate years where the syndicate has only one member and the member is the same in each of those years; or

(3) an agreement under which members of a syndicate in one syndicate year ("the reinsured members") agree with a subsidiary of the Society that that subsidiary will discharge, or procure the discharge of, or indemnify the reinsured members against, all known and unknown insurance business liabilities of the reinsured members arising out of the insurance business carried on by the reinsured members in that syndicate year ("the reinsured liabilities") and where:

(a) that subsidiary is wholly owned by the Society and if from time to time the subsidiary has an asset or cash flow deficiency such that the subsidiary is unable to meet any of the liabilities which it has reinsured, the Society is legally obliged to pay to the subsidiary a sum equal to that deficiency; and

(b) at the effective date of the agreement, the relevant syndicate year has been open for at least two years after the date at which it would normally have been closed in accordance with the policies and practices in relation to the syndicate concerned.

approved security

means any of the following:

(1) any security issued or guaranteed by, or the repayment of the principal of which, or the interest of which, is guaranteed by, and any loans to or deposits with, any government, public or local authority or national industry or undertaking, which belongs to an approved State;

(2) any loan to, or deposit with, an approved financial institution; and

(3) any debenture issued before 31 December 1994 by the Agricultural Mortgage Corporation Limited on the Scottish Agricultural Securities Corporation Limited.

approved State

The changes to this defined term are effective from 23:00 on 31/12/2020.

means any of the following:

(A1) the UK;

(1) an EEA state;

(2) the United States of America;

(3) Canada;

(4) Japan; or

(5) Australia,

other than when that country has rescheduled its external debt.

approved stock lending transaction

means a stock lending transaction in respect of which the conditions in Insurance Company – Risk Management 8.2 have been met.

arranging (bringing about) deals in investments

means the regulated activity specified in article 25(1) of the Regulated Activities Order.

arranging safeguarding and administration of assets

that part of safeguarding and administering investments which consists solely of arranging for one or more other persons to carry on both:

(a) the safeguarding of assets belonging to another; and

(b) the administration of those assets.

Article 109 undertaking

means a UK bank, a building society, a UK designated investment firm, a PRA approved parent holding company, a PRA designated parent holding company, a PRA approved intermediate holding company, a PRA designated intermediate holding company, or a PRA designated institution.

Article 18(5) relationship

means a relationship where undertakings are linked by participations or capital ties other than those referred to in paragraphs (1) and (4) of Article 18 of the CRR.

Article 18(6) relationship

means a relationship of one of the following kinds:

(1) where an institution exercises a significant influence over one or more institutions or financial institutions, but without holding a participation or other capital ties in these institutions; or

(2) where two or more institutions or financial institutions are placed under single management other than pursuant to a contract or clauses of their memoranda or articles of association.

asset management company

The changes to this defined term are effective from 23:00 on 31/12/2020.

means an undertaking with a Part 4A permission under Article 51ZA of the Regulated Activities Order (Managing a UCITS) or an undertaking, the registered office of which is outside the UK and which would require such permission if it had its registered office within the UK.

associate

means (in relation to a person ("A")):

(1) an affiliated company of A;
(2) an appointed representative of A, or a tied agent of A, or of any affiliated company of A; and
(3) any other whose business or domestic relationship with A or A’s associate might reasonably be expected to give rise to a community of interest between them which may involve a conflict of interest in dealings with third parties.

audit committee

means a committee established in accordance with Audit Committee 2.1.

authorised contractual scheme

s237(3) FSMA

authorised electronic money institution

has the meaning given in regulation 2(1) of the Electronic Money Regulations.

authorised payment institution

has the meaning given in regulation 2(1) of the Payment Services Regulations.

authorised person

s417(1) FSMA

authorised UK representative

means (in relation to a firm) a person resident in the UK who is authorised to act generally, and to accept service of any document, on behalf of the firm.

authorised unit trust scheme

s237(3) FSMA

bank

The changes to this defined term are effective from 23:00 on 31/12/2020.

means a firm with a Part 4A permission to carry on the regulated activity of accepting deposits and is a credit institution, but is not a credit union, friendly society or a building society.

Bank of England

Schedule 1 Interpretation Act 1978

banking and investment services conglomerate

means a financial conglomerate that is identified in paragraph 3.1 of Annex 2 (Capital Adequacy Calculations for Financial Conglomerates) of the Financial Conglomerates part of the PRA Rulebook as a ‘banking and investment services conglomerate’.

basic own funds

The changes to this defined term are effective from 23:00 on 31/12/2020.

(in the Solvency II Firms Sector of the PRA Rulebook):

(1) (in relation to a UK Solvency II firm and Lloyd’s), has the meaning given in Own Funds 2.2; or

(2) (in relation to an insurance holding company) means an own funds item referred to in Article 88 of the Solvency II Directive, determined in accordance with (1) as if it were a UK Solvency II firm; or

(3) (in relation to a third country branch undertaking) means an own funds item referred to in article 88 of the Solvency II Directive, determined in accordance with (1) as if it were a UK Solvency II firm.

basic SCR

means the minimum basic SCR, as set out in Solvency Capital Requirement to Standard Formula 3 and as supplemented by the Solvency II Regulations.

benchmarking activities

means the following activities:

(1) the regulated activity of administering a benchmark; or
(2) contribution of input data to a BMR benchmark administrator.

benchmarks regulation

means Regulation (EU) No. 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014.

beneficiary

means any person who is entitled to a right under a contract of insurance.

best estimate

means the best estimate of future cash-flows, calculated in accordance with Technical Provisions 3.

BMR benchmark administrator

means a person who:

(1) is an administrator within the meaning of article 3.1(6) of the benchmarks regulation; and
(2) has been authorised or registered (whether in the UK or elsewhere) in accordance with article 34 of the benchmarks regulation.

body corporate

branch

The changes to this defined term are effective from 23:00 on 31/12/2020.

means

(1) (in relation to a credit institution) a place of business which forms a legally dependent part of a credit institution and which carries out directly all or some of the transactions inherent in the business of credit institutions.

(2) (in relation to an investment firm) a place of business which:

(a) is not the firm’s head office;

(b) is part of the firm;

(c) has no legal personality; and

(d) provides investment services and/or activities; and

(e) may also perform ancillary services for which the investment firm has permission under Part 4A of FSMA.

(3) (in relation to an insurance undertaking) any permanent presence of the insurance undertaking in the UK which:

(a) is managed by the insurance undertaking's own staff; or

(b) is an agency of the insurance undertaking; or

(c) is managed by a person who is independent of the insurance undertaking, but has permanent authority to act for the insurance undertaking as an agency would.

(4) (in relation to an IDD insurance intermediary) a place of business which is a part of an IDD insurance intermediary, not being the principal place of business, which has no separate legal personality and which provides insurance distribution for which the IDD insurance intermediary has been registered.

(5) (in relation to an IDD reinsurance intermediary) a place of business which is a part of an IDD reinsurance intermediary, not being the principal place of business, which has no separate legal personality and which provides reinsurance distribution for which the IDD reinsurance intermediary has been registered.

brought forward amount

means an amount, as defined in Insurance Company – Capital Resources Requirements 10.1 to 10.3 in the Non-Solvency II Firms Sector, used in the calculation of the general insurance capital requirement.

BRRD

means Directive 2014/59/EU of the European Parliament and the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU , and Regulations (EU) No 1093/2010 and (EU) No 648/2012 of the European Parliament and of the Council.

BRRD undertaking

means a CRR firm or a qualifying parent undertaking of a CRR firm.

building society

business day

means:

(1) (in relation to anything done or to be done in (including to be submitted to a place in) any part of the UK) any day which is not a Saturday or Sunday, Christmas Day, Good Friday or a bank holiday in that part of the UK;

(2) (in relation to anything done or to be done by reference to a market outside the UK) any day on which that market is normally open for business.

byelaw

means any byelaw, direction, regulation, or other instrument made using the powers of the Council under section 6 of Lloyd's Act 1982 (including any regulation ratified by the Council by special resolution) and any condition or requirement made under any such byelaw, direction, regulation or other instrument.

capital add-on

means the amount by which the SCR of a UK Solvency II firm, or the group SCR of a group (as appropriate), is increased by the PRA as a result of a standard formula significant risk profile deviation, internal model significant risk profile deviation, significant system of governance deviation, significant deviation from relevant assumptions or (if appropriate) a specific risk existing at group level.

capital redemption

means the class of contract of insurance, specified in paragraph VI of Part II of Schedule 1 to the Regulated Activities Order.

Capital Requirements Regulations

capital resources

means the firm’s capital resources as calculated in accordance with Insurance Company – Capital Resources 2.1.

capital resources table

means the capital resources calculation table at Insurance Company – Capital Resources Table 2.1.

carrying out contracts of insurance

means the regulated activity specified in article 10(2) of the Regulated Activities Order (Effecting and carrying out contracts of insurance).

central assets

means the Society's own assets that are available at its discretion to meet a member's liabilities in respect of insurance business.

central bank

Article 4(1)(46) CRR.

central counterparty

Article 4(1)(34) CRR

Central Fund

means the Central Fund established under Lloyd's Central Fund Byelaw (No 4 of 1986) and the New Central Fund established under Lloyd's New Central Fund Byelaw (No 23 of 1996).

central liabilities

means the liabilities of the Society, excluding any liabilities of members (unless the Society has exercised its discretion to meet such liabilities) or any other participant at Lloyd's other than the Society.

central requirement

means the calculation made by the Society pursuant to the requirements of Solvency Capital Requirement – General Provisions 7.3.

certificate

means a certificate issued under section 63F(1) of FSMA (Issuing of certificates).

certification employee

means an employee (within the meaning in section 63E(9) of FSMA (certification of employees by authorised persons)) of a firm who has a valid certificate issued by that firm.

certification function

The changes to this defined term are effective from 23:00 on 31/12/2020.

means:

(1) for a CRR firm, a credit union and a third country CRR firm in relation to the activities of its establishment in the UK or if it does not have an establishment in the UK its activities in the UK, has the meaning given in Certification 2.2 – 2.4;

(2) for a UK Solvency II firm, the Society, a managing agent, a third country branch undertaking (other than a Swiss general insurer) and a UK ISPV has the meaning given in Insurance – Certification 2;

(3) for a large non-directive insurer and a Swiss general insurer has the meaning given in Large Non-Solvency II Firms – Certification 2; and

(4) for a small non-directive insurer has the meaning given in Non-solvency II Firms – Certification 2.

certification regime

means the requirements of the regulatory system which apply to authorised persons insofar as they relate to persons performing certification functions including those set out in Certification, Fitness and Propriety, Insurance – Certification, Insurance – Fitness and Propriety, Large Non-Solvency II Firms – Certification, Large Non-Solvency II Firms – Fitness and Propriety, Non-Solvency II Firms – Certification and Non-Solvency II Firms – Fitness and Propriety and the corresponding FCA requirements in SYSC 27 and FIT of the FCA Handbook.

Chair of Audit Committee function

has the meaning given in Senior Management Functions 4.4.

Chair of Remuneration Committee function

has the meaning given in Senior Management Functions 4.5.

Chair of Risk Committee function

has the meaning given in Senior Management Functions 4.3.

Chair of the Governing Body function

has the meaning given in Senior Management Functions 4.2.

Chief Risk function

has the meaning given in Senior Management Functions 3.4.

claims amount

means an amount, as defined in Insurance Company – Capital Resources Requirements 9.1 in the Non-Solvency II Firms Sector, used in the calculation of the general insurance capital requirement.

class

means (in relation to a contract of insurance) any class of contract of insurance listed in Schedule 1 to the Regulated Activities Order.

clearing member

Article 300(3) CRR

client

has the meaning given in the FCA Handbook other than for the purposes of the part of the FCA Handbook in Specialist sourcebooks that has the title Professional Firms.

close links

(in the Solvency II Firms Sector of the PRA Rulebook) means a situation in which two or more persons are linked by control or participation, or a situation in which two or more persons are permanently linked to one and the same person by a control relationship.

collateral

means

(1) (in relation to any transaction) a mortgage, charge, pledge or other security interest or, as the context may require, an asset that is subject to a mortgage, charge, pledge or other security interest; and

(2) (in relation to a stock lending, repo or derivative transaction only):

(a) a transfer of assets (other than by way of sale) subject to a right of the transferor to have transferred back to it the same, or equivalent, assets or, as the context may transferor; or

(b) a letter of credit,

where the assets are transferred, or the letter of credit is issued, to secure the performance of the obligations of one of the parties to that transaction.

collective investment scheme

s235(1) FSMA

commodity future

has the meaning given in the PRA Handbook as at 31 July 2015.

commodity option

has the meaning given in the PRA Handbook as at 31 July 2015.

common management relationship

This defined term is effective from 23:00 on 31/12/2020.

means:

(1) (in the CRR firms and Non-CRR firms sectors of the PRA Rulebook) has the meaning given in Article 4(1) CRR;

(2) (in the Solvency II firms and Non-Solvency II firms sectors of the PRA Rulebook) has the meaning given in regulation 2 of the Solvency 2 Regulations;

(3) (in the Financial Conglomerates Part of the PRA Rulebook) has the meaning given in Article 4(1) CRR.

compensation funds

The changes to this defined term are effective from 23:00 on 31/12/2020.

means any policyholder compensation scheme in the UK.

compensation scheme

means the Financial Services Compensation Scheme established under section 213 of FSMA.

competent authority

The changes to this defined term are effective from 23:00 on 31/12/2020.

means:

(1) the PRA, in respect of PRA-authorised persons within the meaning of section 2B(5) of FSMA;

(2) in relation to a MiFID investment firm the authority designated before IP completion day by the UK in accordance with Article 67 of MiFID II;

(3) the FCA, in respect of any other person.

composite firm

means a firm that carries on both long-term insurance business and general insurance business.

Conduct Rules non-executive director

means, in relation to a firm, a person who:

(1) is a member of the board of directors of the firm or, if there is no such board, the equivalent body responsible for the management of the firm;
(2) is not an approved person in relation to the firm; and
(3) does not perform an executive function in relation to that firm.

conduct standards

The changes to this defined term are effective from 23:00 on 31/12/2020.

(1) for a UK Solvency II firm, the Society, a managing agent and a UK ISPV, means the standards of expected conduct specified in Insurance – Conduct Standards 3;
(2) for a third country branch undertaking (other than a Swiss general insurer), means the standards of expected conduct specified in Insurance - Conduct Standards 3.1 to 3.3 and, taking account only of matters relevant to the operations of the third country branch, Insurance – Conduct Standards 3.4 to 3.8;
(3) for a small non-directive insurer, means the standards of expected conduct specified in Non-Solvency II Firms - Conduct Standards 2;
(4) for a large non-directive insurer, means the standards of expected conduct specified in Large Non-Solvency II Firms - Conduct Standards 3; and
(5) for a Swiss general insurer, means the standards of expected conduct specified in Large Non-Solvency II Firms - Conduct Standards 3 taking account only of matters relevant to the operations of the third country branch.

consolidated basis

has the meaning given in point (48) of Article 4(1) of the CRR.

Consolidated Life Directive

means the Council Directive of 5 November 2002 on the taking-up and pursuit of the business of life assurance (No 2002/83/EC), which consolidates the provisions of the First Life Directive, the Second Life Directive and the Third Life Directive.

consolidated situation

Article 4(1)(47) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012

consolidating supervisor

This defined term is effective from 23:00 on 31/12/2020.

means the competent authority responsible for the exercise of supervision on a consolidated basis of:

(1) a UK parent institution; or

(2) an institution controlled by a UK parent financial holding company or UK parent mixed financial holding company.

consolidation group

means the undertakings included in the scope of consolidation pursuant to Articles 18(1), 18(8), 19(1), 19(3) and 23 of the CRR and Groups 2.1 to 2.3.

consolidation group

means the undertakings that a firm is required to include in the scope of consolidation pursuant to Articles 18, 19 and 23 of the CRR and Groups 2.1- 2.3.

contract for differences

means the investment specified in article 85 of the Regulated Activities Order.

contract of differences

means the investment specified in article 85 of the Regulated Activities Order.

contract of insurance

(in relation to a specified investment) the investment, specified in article 75 of the Regulated Activities Order (Contracts of insurance), which is rights under a contract of insurance in (2) below.

(in relation to a contract) has the meaning given in Article 3(1) of the Regulated Activities Order.

contracts of general insurance

has the meaning given in article 3(1) of the Regulated Activities Order.

contracts of long-term insurance

has the meaning given in article 3(1) of the Regulated Activities Order.

contractually based investment

has the meaning provided in Article 3(1) of the Regulated Activities Order.

contribution of input data

has the meaning given in article 3.1(8) of the benchmarks regulation.

control

The changes to this defined term are effective from 23:00 on 31/12/2020.

(in the Solvency II Firms Sector of the PRA Rulebook) means the relationship between a parent undertaking and a subsidiary undertaking where that relationship falls within (1) to (6) of the definition of parent undertaking, or a similar relationship between any person and an undertaking.

controlled function

means a function, relating to the carrying on of a regulated activity by a firm, which is specified by either the FCA or the PRA, under section 59 of FSMA (Approval for particular arrangements).

conversion notification

means a notice required to be sent to the PRA under article 2(1) or 11(b) of the Transitional Order including any update to such a notice.

coordinator

The changes to this defined term are effective from 23:00 on 31/12/2020.

has the meaning given in regulation 1(2) of The Financial Conglomerates Regulations.

core UK group

means all counterparties that:

(a) are listed in a firm’s core UK group permission;

(b) in relation to a firm, satisfy the conditions in Article 113(6) of the CRR; and

(c) in respect of which exposures are exempted, under Article 400(1)(f) of the CRR, from the application of Article 395(1) of the CRR.

core UK group permission

means a permission given by the PRA under Article 113(6) of the CRR.

Council

means the governing body of the Society constituted by section 3 of the Lloyd’s Act 1982.

countercyclical leverage ratio buffer

means the amount of common equity tier 1 capital as defined in Article 50 of the CRR a firm or CRR consolidation entity must calculate in accordance with 4.1 and 4.2 of the Leverage Ratio – Capital Requirements and Buffers Part.

counterparty

means in relation to an insurer:

(1) any one individual;

(2) any one unincorporated body of persons;

(3) any one undertaking not being a member of a group;

(4) any group undertakings excluding any undertakings within the group which are subsidiaries of the firm; or

(5) any government of a State together with all the public bodies, local authorities or nationalised industries of that State,

in which the firm has made investments or against whom it has rights whether under of a contract entered into by the firm or otherwise.

covered bonds

The changes to this defined term are effective from 23:00 on 31/12/2020.

means a debenture that is issued by a credit institution which:

(1) has its head office in the UK; and

(2) is subject by law to special official supervision designed to protect the holders of the debenture; in particular, sums deriving from the issue of the debenture must be invested in accordance with the law in assets which, during the whole period of validity of the debenture, are capable of covering claims attaching to the debenture and which, in the event of failure of the issuer, would be used on a priority basis for the reimbursement of the principal and payment of the accrued interest.

CR Requirement

means an amount of capital resources that a firm must hold as set out in Insurance Company – Capital Resources Requirements 4 and 5.

CRD

means Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC.

CRD credit institution

The changes to this defined term are effective from 23:00 on 31/12/2020.

means a credit institution that has its registered office (or, if it has no registered office, its head office) in the UK, excluding an institution to which the CRD does not apply under Article 2 of the CRD.

credit institution

credit risk

The changes to this defined term are effective from 23:00 on 31/12/2020.

means the risk of loss, or of adverse change, in the financial situation, resulting from fluctuations in the credit standing of issuers of securities, counterparties and any debtors to which a UK Solvency II firm is exposed, in the form of counterparty default risk, or spread risk, or market risk concentrations.

credit union

means a credit union as defined by:

(1) the Credit Unions Act 1979; or

(2) the Credit Unions (Northern Ireland) Order 1985

which is an authorised person.

credit union non-executive director

means a non-executive director of a credit union who is not an approved person in relation to that credit union.

Credit Union Senior Manager function

has the meaning given in Senior Management Functions 6.2.

critical functions

has the meaning in section 3(1) and (2) of the Banking Act 2009.

critical services

means activities, functions or services performed for one or more business units of the firm or for the firm and another member of its group, whether by the firm itself, any other group member or a person outside the firm’s group, the failure of which would lead to the collapse of or present a serious impediment to the performance of the firm’s critical functions.

CRR

Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012.

CRR consolidation entity

means the PRA approved parent holding company, the PRA designated parent holding company or the PRA designated institution or where there is not one for the group concerned, the UK parent institution for that group.

CRR firm

CRR permission

means a permission given to a firm by the PRA under powers conferred on the PRA by the CRR.

CRR rules

has the same meaning as in section 144A of FSMA.

CSD

has the meaning given in Article 2(1)(1) of CSDR.

CSDR

means Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012.

data element

means a discrete fact or individual piece of information relating to a particular field within a data item.

data item

means one or more related data elements that are:

(1) grouped together into a prescribed format or grouped together and "no standard format" is specified; and

(2) required to be submitted by a firm.

dealing

means dealing in investments as principal or dealing in investments as agent.

dealing in investments as agent

means the regulated activity, specified in article 21 of the Regulated Activities Order (Dealing in investments as agent).

dealing in investments as principal

debenture

means the investment, specified in article 77 of the Regulated Activities Order.

debt

includes an obligation to pay a sum of money under a negotiable instrument.

debts due or to become due

includes any debts which would become due if the friendly society were to exercise any right to which it is entitled to require payment or repayments of the same.

deferred acquisition costs

has the meaning in the insurance accounts rules.

deficit reduction amount

means in respect of a defined benefit occupational pension scheme, the sum, determined by a firm in conjunction with the defined benefit occupational pension scheme’s actuaries or trustees (or both), of the additional funding (net of tax) that will be required to be paid into that scheme by the firm over the following five year period for the purpose of reducing the firm’s defined benefit liability.

defined benefit asset

means the excess of the value of the assets in a defined benefit occupational pension scheme over the present value of the scheme liabilities, to the extent that a firm, as employer, in accordance with the accounting principles applicable to it, should recognise that excess as an asset in its balance sheet.

defined benefit liability

means the shortfall of the value of the assets in a defined-benefit occupational pension scheme below the present value of the scheme liabilities, to the extent that a firm, as employer, in accordance with the accounting principles applicable to it, should recognise that shortfall as a liability in its balance sheet.

defined benefit occupational pension scheme

means an occupational pension scheme which is not a defined contribution occupational pension scheme.

defined contribution occupational pension scheme

means an occupational pension scheme into which a firm, as employer, pays regular fixed contributions and will have no legal or constructive obligation to pay further contributions if the scheme does not have sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.

deposit

means the investment, specified in article 74 and defined in articles 5(2) and 5(3) of the Regulated Activities Order.

deposit back arrangement

(in relation to any reinsurance contract) means an arrangement whereby an amount is deposited by the reinsurer with the cedant.

derivative

means a contract for differences, a future or an option.

designated additional information

means such information in such form as may be required pursuant to Article 4 of the Commission Delegated Regulation (EU) 2017/1943 of 14 July 2016 supplementing MiFID II of the European Parliament and of the Council with regard to regulatory technical standards on information and requirements for the authorisation of investment firms as amended from time to time.

designated investment

means a security or a contractually-based investment (other than a funeral plan contract and a right to or interest in a funeral plan contract), that is, any of the following investments, specified in Part III of the Regulated Activities Order (Specified Investments), and a long-term care insurance contract which is a pure protection contract:

(1) life policy (subset of article 75 (Contracts of insurance));

(2) share;

(3) debenture (article 77);

(4) alternative debenture (article 77A);

(5) government and public security (article 78);

(6) instruments giving entitlements to investments (article 79);

(7) certificate representing certain securities (article 80);

(8) unit in a collective investment scheme (article 81);

(9) rights under a stakeholder pension scheme (article 82(1))

(10) rights under a personal pension scheme (article 82(2));

(11) Greenhouse gas allowances which are auctioned (article 82A), where they are a financial instrument.

(12) option; for the purposes of the permission regime, this is sub-divided into:

(a) option (excluding a commodity option and an option on a commodity future);

(b) commodity option and option on a commodity future;

(13) future; for the purposes of the permission regime, this is sub-divided into:

(a) future (excluding a commodity future and a rolling spot forex contract);

(b) commodity future;

(c) rolling spot forex contract;

(14) contract for differences; for the purposes of the permission regime, this is sub-divided into:

(a) contract for differences (excluding a spread bet and a rolling spot forex contract);

(b) spread bet;

(c) rolling spot forex contract;

(15) rights to or interests in investments in (1) to (14) (article 89) but not including rights to or interests in rights under a long-term care insurance contract which is a pure protection contract.

designated investment business

means any of the following activities, specified in Part II of the Regulated Activities Order (Specified Activities), which is carried on by way of business:

(1) dealing in investments as principal, but disregarding the exclusion in article 15 (Absence of holding out etc);

(2) dealing in investments as agent but only in relation to designated investments;

(3) the regulated activity of bidding in emissions auctions (article 24A of the Regulated Activities Order) where it is carried on by a MiFID investment firm (other than a UCITS investment firm, as defined in the FCA Handbook) in relation to a financial instrument;

(4) arranging (bringing about) deals in investments, but only in relation to designated investments;

(5) making arrangements with a view to transactions in investments, but only in relation to designated investments;

(6) operating a multilateral trading facility;

(7) managing investments, but only if the assets consist of or include (or may consist of or include) designated investments;

(8) assisting in the administration and performance of a contract of insurance, but only if the contract of insurance is a designated investment;

(9) safeguarding and administering investments, but only if the assets consist of or include (or may consist of or include) designated investments; for the purposes of the permission regime, this is sub-divided into:

(a) safeguarding and administration of assets (without arranging);

(b) arranging safeguarding and administration of assets;

(10) sending dematerialised instructions (article 45(1));

(11) causing dematerialised instructions to be sent (article 45(2));

(12) establishing, operating or winding up a stakeholder pension scheme);

(13) establishing, operating or winding up a personal pension scheme;

(14) providing basic advice on a stakeholder product (article 52B);

(15) advising on investments, but only in relation to designated investments; for the purposes of the permission regime, this is sub-divided into:

(a) advising on investments (except pension transfers and pension opt-outs);

(b) advising on pension transfers and pension opt-outs;

(16) agreeing to carry on a regulated activity in (1) to (11) and (15) (article 64);

(17) managing a UCITS;

(18) acting as trustee or depositary of a UCITS (article 51ZB);

(19) managing an AIF;

(20) acting as trustee or depositary of an AIF (article 51ZD);

(21) establishing, operating or winding up a collective investment scheme.

designated investment firm

means an investment firm that has been designated by the PRA under Article 3 of Financial Services and Markets Act 2000 (PRA-regulated Activities) Order (S.I. 2013/556).

direct EU legislation

This defined term is effective from 23:00 on 31/12/2020.

has the meaning given in section 3(2) of the European Union (Withdrawal) Act 2018.

director

means (in relation to any of the following (whether constituted in the UK or under the law of a country or territory outside it)):

(a) an unincorporated association;

(b) body corporate;

any person appointed to direct its affairs, including a person who is a member of its governing body and (in accordance with section 417(1) of FSMA):

(i) a person occupying in relation to it the position of a director (by whatever name called); and

(ii) a person in accordance with whose directions or instructions (not being advice given in a professional capacity) the directors of that body are accustomed to act.

disciplinary action

has the meaning given in section 64C of FSMA.

diversification effects

means the reduction in the risk exposure of UK Solvency II firms related to the diversification of their business, resulting from the fact that the adverse outcome from one risk can be offset by a more favourable outcome from another risk, where those risks are not fully correlated.

domestic liquidity sub-group

means the firms supervised by the PRA for liquidity purposes as if they formed a single entity as a result of a permission granted to those firms under 2.2 of the Liquidity (CRR) Part of the PRA Rulebook.

dormant account fund operator

a person with a Part 4A permission for operating a dormant account fund.

EBA

means the European Banking Authority.

EEA State

has the meaning given in the Interpretation Act 1978 and, where the context requires, includes references to Gibraltar as appropriate.

effecting contracts of insurance

means the regulated activity specified in article 10(1) of the Regulated Activities Order (Effecting and carrying out contracts of insurance).

EIOPA

means the European Insurance and Occupational Pensions Authority established in accordance with Regulation (EU) No. 1094/2010 of the European Parliament and of the Council of 24 November 2010.

Electronic Money Regulations

means the Electronic Money Regulations 2011 (SI 2011/99).

eligible counterparty

has the meaning given in the FCA Handbook as amended from time to time for the purposes other than for the purposes of the part of the FCA Handbook in High Level Standards that has the title Principles for Businesses.

eligible deposit

has the meaning given in Depositor Protection 2.

eligible own funds

The changes to this defined term are effective from 23:00 on 31/12/2020.

means:

(1) as to compliance with a UK Solvency II firm’s SCR, the aggregate of the firm’s:

(a) Tier 1 own funds; and

(b) eligible Tier 2 own funds; and

(c) eligible Tier 3 own funds; and

(2) as to compliance with a UK Solvency II firm’s MCR, the aggregate of the firm’s:

(a) Tier 1 own funds; and

(b) eligible Tier 2 own funds; and

(3) as to compliance by a composite firm with the notional life MCR, the aggregate of the firm’s:

(a) Tier 1 own funds; and

(b) Tier 2 basic own funds

that satisfy the limits in Own Funds 4 as if references to the “MCR” in those provisions were references to the notional life MCR; and the limits in the Solvency II Regulations; and

(4) as to compliance by a composite firm with the notional non-life MCR, the aggregate of the firm’s:

(a) Tier 1 own funds; and

(b) Tier 2 basic own funds

that satisfy the limits in Own Funds 4.2 as if references to the “MCR” in those provisions were references to the notional non-life MCR; and the limits in the Solvency II Regulations.

(5) as to compliance with the branch SCR, means the aggregate of the third country branch undertaking’s:

(a) Tier 1 own funds; and

(b) (i) Tier 2 own funds; and

(ii) Tier 3 own funds

that satisfy the limits in Own Funds 4.1, as if references to the “SCR” in those provisions were references to the branch SCR; and the limits in the Solvency II Regulations.

(6) as to compliance with the branch MCR, means the aggregate of the third country branch undertaking’s:

(a) Tier 1 own funds; and

(b) Tier 2 basic own funds that satisfy the limits in Own Funds 4.2 as if references to the “MCR” in those provisions were references to the branch MCR; and the limits in the Solvency II Regulations.

eligible Tier 2 own funds

means;

(1) as to compliance with a UK Solvency II firm’s SCR, the UK Solvency II firm’s Tier 2 own funds that satisfy the limits set out in Own Funds 4.1(1) and the Solvency II Regulations; and

(2) as to compliance with a UK Solvency II firm’s MCR, the firm’s Tier 2 basic own funds that satisfy the limits in Own Funds 4.2 and the Solvency II Regulations.

eligible Tier 3 own funds

means, as to compliance with a UK Solvency II firm’s SCR, the firm’s Tier 3 own funds that satisfy the limits set out in Own Funds 4.1(2).

employee

means an individual:

(1) who is employed or appointed by a person in connection with that person's business, whether under a contract of service or for services or otherwise; or

(2) whose services, under an arrangement between that person and a third party, are placed at the disposal and under the control of that person.

employee

for the purposes of SYSC 4.15, means an individual:

(1) who is employed or appointed by a person in connection with that person's business, whether under a contract of service or for services or otherwise; or

(2) whose services, under an arrangement between that person and a third party, are placed at the disposal and under the control of that person.

employers’ liability

means a contract of insurance against risks of the persons insured incurring liabilities to their employees.

equity share capital

means issued share capital excluding any part of that capital which, neither as respects dividends nor as respects capital, carries any right to participate beyond a specified amount in a distribution.

equivalent securities

means securities issued by the same issuer being of an identical type and having the same nominal value, description and amount.

established surplus

means an excess of assets representing the whole or a particular part of the long-term insurance fund or funds over the liabilities, or a particular part of the liabilities of the insurer attributable to that business as shown by an actuarial investigation.

establishing, operating or winding up a personal pension scheme

means the regulated activity, specified in article 52(b) of the Regulated Activities Order (Establishing etc. a pension scheme).

establishing, operating or winding up a stakeholder pension scheme

means the regulated activity, specified in article 52 (a) of the Regulated Activities Order (Establishing etc. a pension scheme).

establishing, operating or winding-up a collective investment scheme

means the regulated activity specified in article or 51ZE of the Regulated Activities Order (Establishing etc a collective investment scheme).

EU

s1(2) Interpretation Act 1978

EU directive

This defined term is effective from 23:00 on 31/12/2020.

has the meaning given in section 20(1) of the European Union (Withdrawal) Act 2018.

EU-derived domestic legislation

This defined term is effective from 23:00 on 31/12/2020.

has the meaning given in section 2(2) of the European Union (Withdrawal) Act 2018.

European Economic Area

means the area established by the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as it has effect for the time being and which consists of the EEA States.

exceptional adverse situation

means situations where the financial situation of a firm representing a significant share of the market or the affected lines of business is seriously or adversely affected by one or more of the following:

(1) a fall in financial markets which is unforeseen, sharp and steep;

(2) a persistent low interest rate environment;

(3) a high impact catastrophic event.

Excluded Activities and Prohibitions Order

means the Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order 2014 (SI 2014/2080).

excluded assets

means, in relation to a with-profits fund, those assets which the firm has clearly identified in its policy documentation, PPFM, other policyholder communication or otherwise in accordance with any relevant provision of the FCA Handbook as:

(1) available to cover the firm’s liabilities arising from with-profits policies only in particular circumstances; and

(2) not forming part of that with-profits fund.

excluded credit union

for the purposes of SYSC 4.15, means a credit union which has average total gross assets of £250 million or less, determined on the basis of the annual average amount of gross assets calculated across a rolling period of five years or, if it has been in existence for less than five years, across the period during which it has existed (in each case, calculated with reference to the credit union's annual accounting reference date).

FCA

FSMA s417

FCA activities

means a function which would, except for SUP 10C.9.8R or SUP TP 11.2.11R of the FCA Handbook, be an FCA governing function.

FCA activities notification

means:

(1) in respect of a PRA senior management approval application that was made prior to 10 December 2018, the notification required by SUP 10A.11.12R(4) of the FCA Handbook;
(2) in respect of a PRA senior management approval application made on or after 10 December 2018, the notification required by SUP 10C.9.8R(4) of the FCA Handbook.

FCA approval

means at any time an approval granted to and in effect for a person by the FCA under section 59 of FSMA (Approval for particular arrangements) for the performance of a controlled function specified by the FCA.

FCA controlled function

means a controlled function specified by the FCA under section 59 of FSMA (Approval for particular arrangements).

FCA controlled function

means a controlled function specified by the FCA under section 59 of FSMA.

FCA governing function

means any of the FCA controlled functions labelled as FCA governing functions in the table of FCA-designated senior management functions in SUP 10C.4.3R of the FCA Handbook.

FCA Handbook

means the FCA’s Handbook of rules and guidance.

FCA Handbook

means the FCA’s Handbook of rules and guidance as amended from time to time.

FCA responsibilities

means any of:

(1) the responsibilities set out in SYSC 24.2.6R (Table of FCA-prescribed senior management responsibilities) of the FCA Handbook; and

(2) the responsibilities allocated under SYSC 26.3 of the FCA Handbook;

(3) [Deleted.]

(4) [Deleted.]

FCA-authorised person

means (in accordance with section 31 of FSMA (Authorised persons)) an authorised person who is not a PRA-authorised person.

FCA-authorised person

means (in accordance with section 31 of FSMA (Authorised persons)) an authorised person who is not a PRA-authorised person.

FCA-designated senior management function

means an FCA controlled function specified in SUP 10C.4.3R of the FCA Handbook.

final bonus

(in relation to with-profits policy) means a discretionary payment which might be made by a long-term insurer, in addition to the guaranteed benefits, when the benefits under the with-profits policy become payable.

finance scheme

means the finance scheme required to be provided by a UK Solvency II firm to the PRA under Undertakings in Difficulty 4.1(2).

financial conglomerate

has the meaning given in Financial Conglomerates 2.1.

Financial Conglomerates Regulations

This defined term is effective from 23:00 on 31/12/2020.

means the Financial Conglomerates and Other Financial Groups Regulations 2004 (SI 2004/1862).

Financial Groups Directive

means Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate.

financial holding company

has the meaning given in point (20) of Article 4(1) of the CRR.

financial institution

has the meaning given in point (26) of Article 4(1) of the CRR.

financial instruments

The changes to this defined term are effective from 23:00 on 31/12/2020.

means those instruments specified in Part 1 of Schedule 2 to the Regulated Activities Order, read with Part 2 of that Schedule.

financial year

means the period at the end of which the balance of the accounts of the insurer is struck, or, if no balance is struck, the calendar year.

firm

means a PRA-authorised person within the meaning of section 2B(5) of FSMA.

First Life Directive

means the Council Directive of 5 March 1979 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance (No 79/267/EEC).

First Non-Life Directive

the Council Directive of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life insurance (No 73/239/EEC).

fixed interest securities

means securities which under their terms of issue provide for fixed amounts of interest.

flat rate benefits business friendly society

means a friendly society whose insurance business is restricted to the provision of benefits which vary according to the resources available and in which the contributions of members are determined on a flat rate basis.

former member

means a person who has ceased to be a member, whether by resignation or otherwise, in accordance with Lloyd's Act 1982 and any byelaw made under it.

friendly society

s417(1) FSMA

FSCS

means the body corporate established under section 212 of FSMA to administer the compensation scheme.

FSMA

means the Financial Services and Markets Act 2000.

full scope regulatory reference firm

means:

(1) a CRR firm,
(2) a credit union,
(3) a third country CRR firm in relation to the activities of its establishment in the UK,
(4) a UK Solvency II firm,
(5) the Society,
(6) a managing agent,
(7) a third country branch undertaking (other than a Swiss general insurer) in relation to the activities of its establishment in the UK,
(8) a UK ISPV,
(9) a large non-directive insurer,
(10) a small non-directive insurer.

function

means, within a system of governance, an internal capacity to undertake practical tasks.

Fundamental Rules

funds at Lloyd’s

means the assets (not being syndicate assets) provided by or on behalf of a member to meet the liabilities arising from the member’s insurance business at Lloyd's which are held in a Lloyd's trust fund and managed by the Society as trustee.

funeral plan contract

means the investment specified in articles 59(2), 60 and 87 of the Regulated Activities Order.

future

means the investment specified in article 84 of the Regulated Activities Order.

future policy-related liabilities

means, in relation to a with-profits fund, the aggregate of the following amounts (to the extent each constitutes a liability) less the aggregate of such amounts (to the extent each constitutes an asset):

(1) planned deductions for the costs of guarantees, options, smoothing and provision of life cover and other benefits from the amount calculated in accordance with Surplus Funds 3.3 or, where a firm is required under Surplus Funds 3.2 to use the calculation method in Surplus Funds 3.4, in accordance with Surplus Funds 3.4;

(2) planned deductions for other costs deemed chargeable to the amount calculated in accordance with Surplus Funds 3.3 or, where a firm is required under Surplus Funds 3.2 to use the calculation method in Surplus Funds 3.4, in accordance with Surplus Funds 3.4;

(3) future costs of contractual guarantees (other than financial options);

(4) future costs of financial options, including guaranteed annuity and cash options;

(5) future costs or proceeds of smoothing;

(6) future liabilities to repay financing costs of a with-profits fund where the firm expects to have to meet such liabilities; and

(7) other future costs related to the provision of the benefits referred to in Surplus Funds 3.4(4) (regardless of whether the firm is required to effect the calculation in Surplus Funds 3.4),

but only to the extent that they are not already included in the amount calculated in accordance with Surplus Funds 3.3 or, if applicable, Surplus Funds 3.4.

GDPR

means Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC.

general insurance business

the business of effecting contracts of insurance or carrying out contracts of insurance in each case in relation to contracts of general insurance only.

general insurance capital requirement

means the highest of the premiums amount, claims amount and brought forward amount as set out in Insurance Company – Capital Resources Requirements 7.1.

general insurance liabilities

means liabilities arising from general insurance business.

general insurer

means an insurer with permission to effect contracts of insurance or carry out contracts of insurance that are contracts of general insurance.

general liability

means the class of contract of insurance, specified in paragraph 13 of Part I of Schedule 1 to the Regulated Activities Order.

GENPRU

means the General Prudential sourcebook for Banks, Building Societies, Insurers and Investment Firms in the PRA Handbook as at 31 July 2015.

goods in transit

means the class of contract of insurance specified in paragraph 7 of Part I of Schedule 1 to the Regulated Activities Order.

governing body

gross earned premiums

means (in relation to a financial year) such proportion of gross written premiums as is attributable to risk borne by the firm during that financial year.

gross written premiums

means the amounts required by the insurance accounts rules to be shown in the profit and loss account of a firm:

(1) (for general insurance business) at general business technical amount item I.1.(a); and

(2) (for long-term insurance business) at long-term business technical account item II.1.(a).

group

The changes to this defined term are effective from 23:00 on 31/12/2020.

(in the Solvency II Firms Sector of the PRA Rulebook) means a group of undertakings that:

(1) consists of a participating undertaking, its subsidiary undertakings and the undertakings in which it holds a participation, as well as undertakings linked to each other by a common management relationship; or

(2) consists of a mutual-type group.

group provider

in relation to a firm, means

(1) a member of its group that provides critical services to it; or

(2) the firm itself if one of its business units provides the critical services to it.

group recovery plan

means a group recovery plan drawn up by a BRRD undertaking in accordance with Recovery Plans 3.

group SCR

means the solvency capital requirement calculated at the level of the group, in accordance with Group Supervision 4 to 15.

G-SII

has the meaning given in point (133) of Article 4(1) of the CRR.

guarantee fund

means the amount calculated in accordance with Friendly Society – Friendly Society Overall Resources and Guarantee Fund 5.

guidance

means guidance given by the PRA in the form of supervisory statements or otherwise.

Head of Internal Audit function

has the meaning given in Senior Management Functions 3.5.

Head of Third Country Branch function

has the meaning given in 6.2.

Holloway sickness policy

means a contract of long-term insurance offered or effected by a friendly society under the Holloway system, providing permanent health benefits and, in addition, investment benefits, where the investment benefits:

(1) are derived from surpluses accrued by the friendly society and apportioned to policyholders; and

(2) are payable to policyholders at maturity, on retirement, on death, or as otherwise specified by contractual provisions or individual society rules.

ICAAP rules

means the rules in Chapter 3 (Strategies, processes and systems), Chapter 12 (Stress test and scenario analysis) and Chapter 13 (Documentation or risk assessments) of the Internal Capital Adequacy Assessment Part.

ICVC

means a body incorporated under the Open-Ended Investment Companies Regulations 2001(SI 2001/1228).

IDD insurance intermediary

has the meaning given in Article 2(1)(3) of the Insurance Distribution Directive.

IDD reinsurance intermediary

has the meaning given in Article 2(1)(5) of the Insurance Distribution Directive.

immediate group

Section 421ZA FSMA

index-linked benefits

means benefits:

(1) provided for under a linked long-term contract of insurance; and

(2) determined by reference to an index of the value of property of any description (whether specified in the contract or not).

index-linked liabilities

means insurance liabilities in respect of index-linked benefits.

individual capital resources requirement

means:

(1) in relation to an undertaking with a Part 4A permission, any capital requirement imposed by relevant provisions in the PRA Rulebook or FCA Handbook; or

(2) in relation to any other subsidiary the shares of which a firm elects to value in accordance with Insurance Company – Overall Resources and Valuation 8.1, zero.

individual conduct requirements

means:

(1) the Individual Conduct Rules and Senior Manager Conduct Rules in Conduct Rules 2 and 3;
(2) the Individual Conduct Standards and Senior Manager Conduct Standards in Insurance – Conduct Standards 3;
(3) the Individual Conduct Standards and Senior Manager Conduct Standards in Large Non-Solvency II Firms – Conduct Standards 3;
(3A) the Individual Conduct Standards in Non-Solvency II Firms – Conduct Standards 2.

individual member

includes a member which is a limited liability partnership or a body corporate whose members consist only of, or of the nominees for, a single natural person or a group of connected persons.

initial margin

in respect of a derivative or a contract or asset having the effect of a derivative means assets which, before or at the time the contract is entered into, are transferred by the firm subject to a condition that such assets (or, where the assets transferred are securities, equivalent securities) will be returned to the firm on completion of that contract.

Institution

has the meaning given in point (3) of Article 4(1) of the CRR.

institution-specific countercyclical capital buffer rate

has the meaning given in Capital Buffers 3.1(1A).

insurance accounts rules

means Schedule 1 to the Companies Act 1985 (Insurance Companies Accounts) Regulations 1993 (Form and Content of Accounts of Insurance Companies and Groups) where these provisions are applicable, otherwise Schedule 3 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410) (Insurance Companies: Companies Act Individual Accounts).

insurance business

means the regulated activities of effecting contracts of insurance or carrying out contracts of insurance.

insurance conglomerate

means a financial conglomerate that is identified in paragraph 3.1 of Annex 2 of the Financial Conglomerates Part as an insurance conglomerate.

insurance death risk capital component

means one of the components of the long-term insurance capital requirement as set out in Insurance Company – Capital Resources Requirements 15.2.

Insurance Directives

means the Consolidated Life Directive and the First Non-Life Directive, Second Non-Life Directive and Third Non-Life Directive.

insurance distribution

has the meaning given in Article 2(1)(1) of the Insurance Distribution Directive.

Insurance Distribution Directive

means the European Parliament and Council Directive of 20 January 2016 on insurance distribution (No 2016/97/EC).

insurance expense risk capital component

means one of the components of the long-term insurance capital requirement as set out in Insurance Company – Capital Resources Requirements 17.2.

Insurance Groups Directive

means Directive of the European Parliament and of the Council of 27 October 1998 on the supplementary supervision of insurance undertakings in an insurance group (1998/78/EC).

insurance health risk and life protection reinsurance capital component

means one of the components of the long-term insurance capital requirement as set out in Insurance Company – Capital Resources Requirements 16.1.

insurance holding company

means a parent undertaking, other than a UK Solvency II firm and a mixed financial holding company, the main business of which is to acquire and hold participations in subsidiary undertakings and which fulfils the following conditions:

(1) its subsidiary undertakings are either exclusively or mainly UK Solvency II firms, third country insurance undertakings, third country reinsurance undertakings or ancillary insurance services undertakings: the subsidiary undertakings of a parent undertaking are mainly UK Solvency II firms, third country insurance undertakings, third country reinsurance undertakings or ancillary insurance services undertakings where more than 50% of two or more of:

(a) the parent undertaking’s consolidated assets;

(b) the parent undertaking’s consolidated revenues;

(c) the group SCR (as if calculated at the level of the parent undertaking),

are derived from subsidiaries that are UK Solvency II firms, third country insurance undertakings, third country reinsurance undertakings or ancillary insurance services undertakings; and

(2) at least one of those subsidiary undertakings is a UK Solvency II firm.

insurance liabilities

in respect of a friendly society, means amounts calculated in accordance with Friendly Society – Liability Valuation in respect of those items shown at C and D under the heading “Liabilities” in Part I of Schedule 2 to the Accounts Regulations.

insurance market activities

means a regulated activity relating to contracts of insurance written at Lloyd's.

insurance market risk capital component

means one of the components of the long-term insurance capital requirement as set out in Insurance Company – Capital Resources Requirements 18.1.

insurance risk transformation

means the regulated activity specified in Article 13A of the Regulated Activities Order (Transformer vehicles: insurance risk transformation).

insurance special purpose vehicle

The changes to this defined term are effective from 23:00 on 31/12/2020.

means a UK ISPV.

insurance undertaking

insurer

means a firm with permission to effect contracts of insurance or carry out contracts of insurance.

insurer under write-down

means an insurer other than a friendly society, in respect of which a write-down order has effect.

intermediary

means a person who in the course of any business or profession invites other persons to make offers or proposals or to take other steps with a view to entering into contracts of insurance with a friendly society, other than a person who only publishes such invitations on behalf of, or to the order of, some other person.

internal controls

means the whole system of controls, financial or otherwise, established by the management of a firm in order to:

(1) carry on the business of the firm in an orderly and efficient manner;

(2) ensure adherence to management policies;

(3) safeguard the assets of the firm and other assets for which the firm is responsible; and

(4) secure as far as possible the completeness and accuracy of the firm’s records (including those necessary to ensure continuous compliance with the requirements or standards under the regulatory system relating to the adequacy of the firm’s financial resources).

internal model

means the methodology used by a firm to calculate part or all of its SCR, or by a group to calculate part or all of its group SCR, in place of the standard formula.

internal model approval

means:

(1) the approval granted to a firm by the PRA to use an internal model to calculate part (partial internal model) or all of its SCR;

(2) in relation to a UK Solvency II firm that is a member of a group, the approval granted to that firm by the PRA to use an internal model to calculate part (partial internal model) or all of its group SCR.

internal model significant risk profile deviation

means the determination by the PRA of a significant deviation in the risk profile of a UK Solvency II firm, or a group (as appropriate), from the assumptions underlying the SCR (or group SCR, as appropriate) in circumstances where the firm’s SCR (or the group’s group SCR, as appropriate) is calculated using an internal model.

intra-group transaction

The changes to this defined term are effective from 23:00 on 31/12/2020.

means all transactions by which regulated entities within a financial conglomerate rely directly or indirectly on other undertakings within the same group or on any natural or legal person linked to the undertakings within that group by close links, for the fulfilment of an obligation, whether or not contractual, and whether or not for payment.

investment

means (in accordance with sections 22(4) of FSMA (Regulated activities) and section 93(2) of the Financial Services Act 2012) any investment, including any asset, right or interest.

investment firm

means any person whose regular occupation or business is the provision of one or more investment services to third parties and/or the performance of one or more investment activities on a professional basis.

investment holding company

has the meaning given in point (22A) of Article 4(1) of the CRR.

investment services and/or activities

The changes to this defined term are effective from 23:00 on 31/12/2020.

means any of the services and activities listed in Part 3 of Schedule 2 to the Regulated Activities Order, insofar as they relate to any of the instruments listed in Part I of Schedule 2 to that Order.

IP completion day

This defined term is effective from 23:00 on 31/12/2020.

has the meaning given in section 39(1) of the European Union (Withdrawal Agreement) Act 2020.

issuer

means:

(1) (in relation to any security) (other than a unit in a collective investment scheme) the person by whom it is or is to be issued;

(2) (in relation to a unit in a collective investment scheme) the operator of the collective investment scheme;

(3) (in relation to an interest in a limited partnership except for a partnership scheme) the partnership;

(4) (in relation to certificates representing certain securities) the person who issued or is to issue the security to which the certificate or other instrument relates; or

(5) an entity which issues transferable securities and, where appropriate, other financial instruments.

joint account

means an account opened in the name of two or more persons over which two or more persons have rights that are exercised by means of the signature of one or more of those persons.

jointly controlled body

means a body that friendly society has joint control of in accordance with section 13 of the Friendly Societies Act 1992.

key function

The changes to this defined term are effective from 23:00 on 31/12/2020.

(1) in relation to a UK Solvency II firm, the Society, a managing agent, a UK ISPV and a large non-directive insurer means each of the following in relation to the carrying on of a regulated activity by the firm:

(a) the risk-management function;

(b) the compliance function;

(c) the internal audit function;

(d) the actuarial function;

(e) the function of effectively running the firm; and

(f) any other function which is of specific importance to the sound and prudent management of the firm;

(2) in relation to a third country branch undertaking means, in relation to the carrying on of a regulated activity by the third country branch undertaking, each of the following functions performed in relation to the operations effected by the third country branch:

(a) the risk-management function;

(b) the compliance function;

(c) the internal audit function;

(d) the actuarial function;

(e) the function of effectively running the operations effected by the third country branch;

(f) the function of being the authorised UK representative; and

(g) any other function which is of specific importance to the sound and prudent management of the third country branch;

(3) in relation to a third country insurance service provider means, in relation to the carrying on of a regulated activity by the third country insurance services provider in the UK:

(a) the risk-management function;

(b) the compliance function;

(c) the internal audit function;

(d) the actuarial function;

(e) the function of effectively running the operations effected by the third country insurance services provider; and

(f) any other function which is of specific importance to the sound and prudent management of the third country insurance services provider.

key function holder

(1) means any person who is responsible for discharging a key function;

(2) in the Regulatory Reporting Part, means an individual who has significant influence over the direction of the activities of the branch, but who is neither a member of the management body nor the CEO.

large firm

means:

(1) a firm with a Part 4A permission to:

(a) effect contracts of insurance; or

(b) carry out contracts of insurance;

(2) the Society; or

(3) a managing agent

in respect of which:

(a) the amount of the firm’s gross written premiums exceeds £1 billion in each annual report and accounts prepared by the firm for each of the previous three financial years; or

(b) the amount of the firm’s assets relating to all regulated activities carried on by the firm exceeds £10 billion in each annual report and accounts prepared by the firm for each of the previous three financial years;

and:

(i) where the firm has not produced annual report and accounts for three financial years, the amounts in (a) and (b) are the amounts reported by the firm in those annual report and accounts that have been published by the firm; and

(ii) where the firm is a third country branch undertaking, the amounts in (a) and (b) are only those amounts relating to the operations effected by the third country branch.

large non-directive insurer

means a non-directive insurer in respect of which the value of assets relating to all regulated activities carried on by the firm as included in its two most recent reported annual accounts is more than £25,000,000.

leverage ratio

has the meaning given in Article 429(2) of Chapter 3 of the Leverage Ratio (CRR) Part.

liabilities to policyholders

means (in relation to a firm carrying out contracts of insurance) any liability or obligations of that firm to, or in respect of, a policyholder.

liability of ships

means the class of contract of insurance, specified in paragraph 12 of Part I of Schedule 1 to the Regulated Activities Order.

linked benefit

means a benefit payable under a linked long-term contract of insurance or a regulated collective investment scheme the amount of which is determined by reference to:

(1) the value of the property of any description (whether specified or not);

(2) fluctuations in the value of any such property;

(3) income from such property; or

(4) fluctuations in an index of the value of such property.

linked long-term

means (in relation to a contract of insurance) a contract of long-term insurance where the benefits are wholly or partly to be determined by reference to the value of, or the income from, property of any description (whether or not specified in the contract) or by reference to fluctuations in, or in an index of, the value of property of any description (whether or not so specified).

linked long-term liabilities

means the insurance obligations in respect of linked benefits under a linked long-term contract of insurance.

listed

The changes to this defined term are effective from 23:00 on 31/12/2020.

means:

(1) included in the official list; or

(2) in respect of which facilities for dealing on a regulated market have been granted.

Lloyd's trust deed

means a trust deed in the form prescribed by the Society and notified to the PRA, for execution by a member in respect of his insurance business.

Lloyd's trust fund

means a fund held on the terms of a Lloyd's trust deed.

long-term care insurance contract

a long-term insurance contract:

(a) which provides, would provide at the policyholder's option, or is sold or held out as providing, benefits that are payable or provided if the policyholder's health deteriorates to the extent that he cannot live independently without assistance and that is not expected to change; and

(b) under which the benefits are capable of being paid for periodically for all or part of the period that the policyholder cannot live without assistance;

where 'benefits' are services, accommodation or goods necessary or desirable for the continuing care of the policyholder because he cannot live independently without assistance.

long-term insurance assets

has the meaning set out in Insurance Company – Internal Contagion Risk 4.2.

long-term insurance business

the business of effecting contracts of insurance or carrying out contracts of insurance in each case in relation to contracts of long-term insurance only.

long-term insurance business asset

in relation to a friendly society, means the assets of a firm which are, for the time being, identified as representing the long-term insurance business fund or funds maintained by that firm in respect of its long-term insurance business.

long-term insurance capital requirement

means the amount determined in accordance with Insurance Company – Capital Resources Requirement 14.1, being the sum of the insurance death risk capital component, the insurance health risk and life protection reinsurance capital component, the insurance expense risk capital component, the insurance market risk capital component and the resilience capital requirement.

long-term insurance contract

means a “contract of long-term insurance” as defined in Article 3(1) of the Regulated Activities Order.

long-term insurance fund

has the meaning set out in Insurance Company – Internal Contagion Risk 4.3.

long-term insurance liabilities

means liabilities arising from long-term insurance business.

long-term insurer

means an insurer with permission to effect contracts of insurance or carry out contracts of insurance that are contracts of long-term insurance.

LREQ basis

means, in respect of an LREQ firm, the basis or bases of application on which the Leverage Ratio – Capital Requirements and Buffers Part applies to that LREQ firm.

LREQ firm

means a firm or CRR consolidation entity to which the Leverage Ratio – Capital Requirements and Buffers Part applies in accordance with rule 1.1 of that Part.

major business unit

has the meaning given in Article 1(41) or (42) of the Solvency II Regulations, as appropriate.

making arrangements with a view to transactions in investments

means the regulated activity, specified in article 25(2) of the Regulated Activities Order (Arranging deals in investments).

management body

means a firm’s body or bodies, which are appointed in accordance with national law, which are empowered to set the firm’s strategy, objectives and overall direction, and which oversee and monitor management decision-making, and include the persons who effectively direct the business of the firm.

management expenses

means all expenses, other than commission, incurred in the administration of a firm or its business.

management responsibilities map

has the meaning given in Allocation of Responsibilities 6.

managing a UCITS

means the regulated activity, specified in article 51ZA of the Regulated Activities Order (Managing a UCITS).

managing agent

has the meaning given in article 3(1) of the Regulated Activities Order.

managing an AIF

means the regulated activity, specified in article 51ZC of the Regulated Activities Order (Managing an AIF).

managing investments

means the regulated activity, specified in article 37 of the Regulated Activities Order (Managing investments).

mandatory disclosure

means an obligation in any applicable laws, regulations or rules to declare or disclose information to the public.

margin of solvency

means the excess of the value of the friendly society’s assets over the amount of its liabilities, that value and amount being determined in accordance with Friendly Society – Asset Valuation, Friendly Society – Liability Valuation and Friendly Society – Overall Resources and Guarantee Fund 8.

market risk

(1) (except in the Solvency II Firms and Non-Solvency II Firms Sectors of the PRA Rulebook) means the risk that arises from fluctuations in values of, or income from assets, or in interest or exchange rates.

(2) (in the Solvency II Firms and Non-Solvency II Firms Sectors of the PRA Rulebook) means the risk of loss or of adverse change in the financial situation resulting, directly or indirectly, from fluctuations in the level and in the volatility of market prices of assets, liabilities and financial instruments.

market value

means the market value as determined in accordance with generally accepted accounting practice.

matching adjustment

The changes to this defined term are effective from 23:00 on 31/12/2020.

means the adjustment to the relevant risk-free interest rate term structure to calculate the best estimate of a relevant portfolio of insurance or reinsurance obligations in accordance with:

(1) Technical Provisions 6 and 7;

(2) the Solvency II Regulations adopted under Article 86(1)(h) - (i) of the Solvency II Directive;

(3) for the purposes of calculating technical provisions as at a point in time falling before IP completion day, the relevant technical information made by EIOPA under Article 77e(1)(b) of the Solvency II Directive and adopted in the Solvency II Regulations under Article 77e(2) of the Solvency II Directive; and

(4) for the purposes of calculating technical provisions as at a point in time falling on or after IP completion day, the relevant technical information published by the PRA in accordance with regulation 4B(1) of the Solvency 2 Regulations.

matching adjustment approval

means the approval granted to a firm by the PRA to permit it to apply a matching adjustment for the purposes of calculating the best estimate in relation to a relevant portfolio of insurance and reinsurance obligations.

material outsourcing

material risk taker

means an employee (within the meaning in section 63E(9) of FSMA (certification of employees by authorised persons)) of a firm whose professional activities have a material impact on the firm's risk profile.

mathematical reserves

the provision made by an insurer to cover liabilities (excluding liabilities which have fallen due and liabilities arising from deposit back arrangements) arising under or in connection with contracts of long-term insurance.

MCR

means the minimum capital requirement calculated in accordance with the Minimum Capital Requirement Part of the PRA Rulebook.

member

means a person admitted to membership of the Society or any person by law entitled or bound to administer its affairs.

MiFID business

means investment services and activities and, where relevant, ancillary services carried on by a MiFID investment firm.

MiFID II

means Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (recast).

MiFID investment firm

The changes to this defined term are effective from 23:00 on 31/12/2020.

has the meaning given in paragraph 2.1A of MiFIR.

MiFIR

means Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012.

minimum guarantee fund

means an amount calculated in accordance with Friendly Society - Overall Resources and Guarantee Fund 6 for long-term insurance business and Friendly Society - Overall Resources and Guarantee Fund 7 for general insurance business, whether the required margin of solvency is greater or less than that amount.

mixed financial holding company

The changes to this defined term are effective from 23:00 on 31/12/2020.

means a parent undertaking other than a regulated entity, which together with its subsidiaries, at least one of which is a regulated entity which has its head office in the UK, and other entities constitutes a financial conglomerate.

mixed-activity holding company

has the meaning given in point (22) of Article 4(1) of the CRR.

MODR

means the Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing MiFID II of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive.

money

means any form of money, including cheques and other payable orders.

money-market instruments

means those classes of financial instruments which are normally dealt in on the money market, such as treasury bills, certificates of deposit and commercial papers and excluding instruments of payment.

month

Schedule 1, Interpretation Act 1978

motor vehicle liability

means the class of contract of insurance, specified in paragraph 10 of Part I of Schedule 1 to the Regulated Activities Order.

MTF

The changes to this defined term are effective from 23:00 on 31/12/2020.

means a multilateral system, operated by an investment firm or a market operator, which brings together multiple third-party buying and selling interests in financial instruments – in the system and in accordance with non-discretionary rules – in a way that results in a contract in accordance with provisions implementing Title II of MiFID II.

mutual

means an insurer which:

(1) if it is a body corporate has no share capital (except a wholly owned subsidiary with no share capital but limited by guarantee); or

(2) is a friendly society; or

(3) is a society registered or deemed to be registered under Co-operative and Community Benefit Societies Act 2014 or the Industrial and Provident Societies (Northern Ireland) Act 1969.

mutual-type group

The changes to this defined term are effective from 23:00 on 31/12/2020.

means a group of undertakings that is based on the establishment, contractually or otherwise, of strong and sustainable financial relationships among those undertakings, and that may include mutual or mutual-type associations, provided that:

(1) one of those undertakings effectively exercises, through centralised coordination, a dominant influence over the decisions, including financial decisions, of the other undertakings that are part of the group of undertakings; and

(2) the establishment and dissolution of such relationships are subject to prior approval by the PRA,

where the undertaking exercising the centralised coordination shall be considered as the parent undertaking, and the other undertakings shall be considered as subsidiary undertakings.

national specific template

means a template which a firm is required to complete pursuant to Reporting 2.6 and 2.8.

net premium

means the premium that is calculated to provide the basic sum assured under a with-profits policy taking into consideration only the mortality and interest rate risks and using the same assumptions as used in the calculation of the mathematical reserves.

non-core large exposures group or NCLEG

has the meaning given in the Large Exposures Part.

non-directive firm

The changes to this defined term are effective from 23:00 on 31/12/2020.

means (in accordance with the Financial Services and Markets Act 2000 (Controllers)(Exemption) Order 2009 (SI 2009/774)) a UK domestic firm other than:

(1) a credit institution authorised under provisions which implemented the Banking Consolidation Directive;

(2) an investment firm authorised under provisions which implemented MiFID II;

(3) a management company as defined in article 2(1)(b) of the UCITS Directive, authorised under provisions which implemented that directive;

(4) a UK Solvency II firm, the Society and managing agents.

non-directive friendly society

means a friendly society that is not a UK Solvency II firm.

non-directive insurer

The changes to this defined term are effective from 23:00 on 31/12/2020.

means a firm with a Part 4A permission to effect contracts of insurance or carry out contracts of insurance, other than:

(1) a UK Solvency II firm;

(2) a third country branch undertaking; or

(3) where the firm has the permission by reason only of the operation of the EEA Passport Rights (Amendment etc., and Transitional Provisions) (EU Exit) Regulations 2018.

non-executive director

means a director of a firm who does not perform an executive function in relation to that firm.

non-listed institution

means an institution that has not issued securities that are admitted to trading on a regulated market.

non-profit insurance business

means the business of effecting contracts of insurance or carrying out contracts of insurance that are non-profit policies.

non-profit policy

means a contract of long-term insurance which is not a with-profits policy.

non-Solvency I firm

means a firm that immediately before the Solvency II implementation date fell outside the scope of each of the Solvency I Directives.

non-UCITS retail scheme

The changes to this defined term are effective from 23:00 on 31/12/2020.

means an ICVC, authorised unit trust scheme, or an authorised contractual scheme which is not a collective investment scheme falling within provisions implementing the UCITS Directive or a qualified investor scheme.

non-UK credit institution

means a credit institution whose registered office or, if it does not have a registered office, whose head office, is outside the UK.

non-UK G-SII

has the meaning given in point (134) of Article 4(1) of the CRR.

notified non-executive director

means a non-executive director of a firm who is not an approved person in relation to that firm.

notified non-executive director

means a non-executive director of a CRR firm who is not an approved person in relation to that firm.

notional life MCR

means the notional minimum capital requirement calculated under Composites 4.2(1).

notional life SCR

means the notional solvency capital requirement for long-term insurance business, calculated in accordance with the Solvency II Regulations.

notional non-life MCR

means the notional minimum capital requirement calculated under Composites 4.2(2).

notional non-life SCR

means the notional solvency capital requirement for general insurance business, calculated in accordance with the Solvency II Regulations.

occupational pension scheme

has the meaning set out in article 3(1) of the Regulated Activities Order.

officer

means, in relation to a body corporate:

(1) a director, member of the committee of management, chief executive, manager, secretary or other similar officer of the body, or a person purporting to act in any such capacity; and

(2) an individual who is a controller of the body.

official list

The changes to this defined term are effective from 23:00 on 31/12/2020.

means the list maintained by the FCA in accordance with section 74(1) of FSMA for the purposes of Part VI of FSMA.

offsetting transaction

means, in accordance with Insurance Company – Risk Management 7.8 and 7.9:

(1) an approved derivative, approved stock lending transaction or an approved quasi-derivative; or

(2) a covered transaction with an approved counterparty for the purchase of assets.

ONA system

means the PRA’s online notification and applications system, by whatever name known.

operating a dormant account fund

means any of the regulated activities specified in:

(1) article 63N(1)(a) of the Regulated Activities Order (meeting of repayment claims); or

(2) article 63N(1)(b) of the Regulated Activities Order (managing dormant account funds (including the investment of such funds)).

operating a multilateral trading facility

means the regulated activity in article 25D of the Regulated Activities Order.

operational risk

(in the Solvency II Firms Sector of the PRA Rulebook) means the risk of loss arising from inadequate or failed internal processes, personnel or systems, or from external events, including legal risks which, for the purposes of Solvency Capital Requirement – General Provisions 3.3(1), includes legal risks but excludes risks arising from strategic decisions and reputational risks.

(in the Non-Solvency II Firms Sector of the PRA Rulebook) means the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk.

Operator

in relation to a payment system has the same meaning as in Part 5 of the Banking Act 2009 (see section 183 of that Act).  

option

means the investment specified in article 83 of the Regulated Activities Order.

ORSA

means the own risk and solvency assessment carried out from time to time, as detailed in Conditions Governing Business 3.8 to 3.11.

O-SII

means a person or group identified by the PRA in accordance with Part 5 of the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014 (SI 2014/894).

OTC derivative

means a derivative traded solely over the counter.

OTF

This defined term is effective from 23:00 on 31/12/2020.

means a multilateral system which is not a regulated market or an MTF and in which multiple third-party buying and selling interests in bonds, structured finance products, emission allowances or derivatives are able to interact in the system in a way that results in a contract in accordance with provisions implementing Title II of MiFID II.

outsourcing

means an arrangement of any form between a firm and a service provider, whether a supervised entity or not, by which that service provider performs a process, a service or an activity, whether directly or by sub-outsourcing, which would otherwise be undertaken by the firm itself.

overseas firm

means a firm which has its registered office (or, if it has no registered office, its head office) outside the UK.

overseas regulator

This defined term is effective from 23:00 on 31/12/2020.

means a regulator outside the United Kingdom.

own funds

The changes to this defined term are effective from 23:00 on 31/12/2020.

(in the Solvency II Firms Sector of the PRA Rulebook) means:

(1) (in relation to a UK Solvency II firm and Lloyd’s) the firm’s aggregate basic own funds and ancillary own funds as determined in accordance with the Own Funds Part of the PRA Rulebook; or

(2) (in relation to an insurance holding company) own funds determined in accordance with (1) as if it were a UK Solvency II firm; or

(3) (in relation to a third country branch undertaking) the firm’s aggregate basic own funds and ancillary own funds as determined in accordance with (1) as if it were a UK Solvency II firm.

parent undertaking

The changes to this defined term are effective from 23:00 on 31/12/2020.

(in the Solvency II Firms Sector of the PRA Rulebook) means, in accordance with section 420 of FSMA (Parent and subsidiary undertaking) and section 1162 of the Companies Act 2006 (Parent and subsidiary undertakings), an undertaking which has the following relationship to another undertaking ("S"):

(1) it holds a majority of the voting rights in S; or

(2) it is a member of S and has the right to appoint or remove a majority of its board of directors; or

(3) it has the right to exercise a dominant influence over S through:

(a) provisions contained in S's memorandum or articles; or

(b) a control contract; or

(4) it is a member of S and controls alone, under an agreement with other shareholders or members, a majority of the voting rights in S; or

(5) (a) it has the power to exercise, or actually exercises, dominant influence or control over S; or

(b) it and S are managed on a unified basis; or

(6) it is a parent undertaking of a parent undertaking of S; or

(7) where, in the opinion of the PRA, it effectively exercises a dominant influence over S;

and:

(8) in relation to (2) and (4), the undertaking will be treated as a member of S if any of its subsidiary undertakings is a member of S, or if any shares in S are held by a person acting on behalf of the undertaking or any of its subsidiary undertakings;

(9) the provisions of Schedule 7 to the Companies Act 2006 (Parent and subsidiary undertakings: supplementary provisions) explain the expressions used in and supplement paragraphs (1) to (6).

parent undertaking

s420 FSMA

Part 4A permission

means a permission given by the FCA or PRA under Part 4A of FSMA (Permission to carry on regulated activities), or having effect as if so given.

partial internal model

means an internal model that is:

(1) used to calculate one or more of the following:

(a) one or more risk modules, or sub-modules, of the basic SCR;

(b) the capital requirement for operational risk set out in Solvency Capital Requirement – Standard Formula 5;

(c) the adjustment for the loss-absorbing capacity of technical provisions and deferred taxes set out in Solvency Capital Requirement – Standard Formula 6; or

(2) applied to the whole of a firm's insurance business , or only to one or more of its major business units.

participating UK Solvency II firm

This defined term is effective from 23:00 on 31/12/2020.

means a UK Solvency II firm that holds a participation in another undertaking.

participating undertaking

The changes to this defined term are effective from 23:00 on 31/12/2020.

means an undertaking that holds a participation in another undertaking or an undertaking linked with another undertaking by a common management relationship.

participation

The changes to this defined term are effective from 23:00 on 31/12/2020.

(in the Solvency II Firms Sector of the PRA Rulebook) means:

(1) the ownership, direct or by way of control, of 20% or more of the voting rights or capital of an undertaking; or

(2) where, in accordance with the definition of ‘participating undertaking’ in Regulation 2(1) of the Solvency 2 Regulations, an undertaking effectively exercises a significant influence over another undertaking.

partner

means (in relation to a firm which is a partnership) any person appointed to direct its affairs, including:

(1) a person occupying the position of a partner (by whatever name called); and

(2) a person in accordance with whose directions or instructions (not being advice given in a professional capacity) the partners are accustomed to act.

partnership

s417(1) FSMA

partnership scheme

s235A(5) FSMA

Payment Services Regulations

means the Payment Services Regulations 2017 (SI 2017/752).

payment system

has the meaning given in section 182 of the Banking Act 2009.

pension contract

means a contract under which rights to benefits are obtained by the making of contributions to an occupational pension scheme or to a personal pension scheme, where the contributions are paid to a regulated collective investment scheme.

pension opt-out

has the meaning given in the PRA Handbook as at 31 July 2015.

pension policy

means a contract under which a right to benefits results from contributions made to an occupational pension scheme or to a personal pension scheme, where the contributions are paid to an insurer.

pension scheme

means a scheme under which a right to benefits results from contributions made under a pension contract or pension policy.

pension transfer

has the meaning given in the PRA Handbook as at 31 July 2015.

permanent health

means the class of contract of insurance, specified in paragraph 4 of Part 2 of Schedule 1 to the Regulated Activities Order.

permanent share capital

has the meaning set out in Insurance Company – Capital Resources 5.1.

permission

means permission to carry on regulated activities.

person

Interpretation Act 1978 Schedule 1

personal pension scheme

has the meaning provided in Article 3(1) of the Regulated Activities Order.

policy

has the meaning given in article 2 of the Financial Services and Markets Act 2000 (Meaning of "Policy" and "Policyholder") Order 2001 (SI 2001/2361).

policyholder

The changes to this defined term are effective from 23:00 on 31/12/2020.

either:

(1) means, in respect of a contract of insurance where the insurance undertaking is a UK Solvency II firm, a policyholder which includes a beneficiary; or

(2) has the meaning given in article 3 of the Financial Services and Markets Act 2000 (Meaning of "Policy" and "Policyholder") Order 2001 (SI 2001/2361).

policyholder protection scheme

means the compensation scheme for claims under contracts of insurance.

PPFM

means the Principles and Practices of Financial Management which a firm carrying on with-profits insurance business must establish, maintain and record under COBS 20.3 of the FCA Handbook.

PRA

means the Prudential Regulation Authority.

PRA approved intermediate holding company

means a financial holding company or mixed financial holding company within the meaning of points (20) and (21) respectively of Article 4(1) of the CRR that this not a UK parent financial holding company or a UK parent mixed financial holding company and that is approved under Part 12B of FSMA.

PRA approved parent holding company

The changes to this defined term are effective from 23:00 on 31/12/2020.

means a UK parent financial holding company or UK parent mixed financial holding company that is approved under Part 12B of FSMA.

PRA approved person

means a person approved by the PRA under section 59 of FSMA (Approval for particular arrangements) to perform a PRA senior management function.

PRA designated institution

means a CRR firm that is designated under Part 12B of FSMA or regulation 5(5) of the Financial Holding Companies (Approval etc.) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020.

PRA designated intermediate holding company

means a financial holding company or mixed financial holding company within the meaning of points (20) and (21) respectively of Article 4(1) of the CRR that this not a UK parent financial holding company or a UK parent mixed financial holding company and that is designated under Part 12B of FSMA.

PRA designated parent holding company

The changes to this defined term are effective from 23:00 on 31/12/2020.

means an UK parent financial holding company or UK parent mixed financial holding company that is designated under Part 12B of FSMA.

PRA Handbook

means the PRA’s Handbook of rules and guidance.

PRA senior management approval application

means an application to perform a PRA senior management function under section 59 of FSMA.

PRA senior management function

The changes to this defined term are effective from 23:00 on 31/12/2020.

means:

(1) in respect of a CRR firm, a credit union and a third country CRR firm a function specified as a controlled function in Senior Management Functions 2 in relation to the carrying on of regulated activity by a firm.
(2) (in respect of a UK Solvency II firm, the Society, a managing agent, a third country branch undertaking (other than a Swiss general insurer) and a UK ISPV) that aspect of any key function relating to the carrying on of a regulated activity by the firm, which is specified by the PRA in Insurance – Senior Management Functions 3 to 10 pursuant to section 59 of FSMA.
(3) (in respect of a small non-directive insurer) any function which is specified by the PRA in Non-Solvency II Firms – Senior Management Functions 3 to 5 pursuant to section 59 of FSMA.
(4) (in respect of a large non-directive insurer and a Swiss general insurer) any function which is specified by the PRA in Large Non-Solvency II Firms – Senior Management Functions 3 to 9 pursuant to section 59 of FSMA.
(5) (in respect of a third country insurance service provider in relation to the carrying on by the firm of a regulated activity in the UK) any function specified in Insurance – Senior Management Functions 3 to 10.

PRA senior management function holder

means a person who has been approved to perform a PRA senior management function in respect of the firm.

PRA-authorised person

FSMA s2B(5)

preference share

means a share conferring preference as to income or return of capital which does not form part of the equity share capital of an undertaking.

premium

means the consideration payable under a contract of insurance by the policyholder to the insurer.

premiums amount

means an amount, as defined in Insurance Company – Capital Resources Requirements 8.1, used in the calculation of the general insurance capital requirement.