Application and Definitions


Unless otherwise stated, this Part applies to:

  1. (1) a non-directive insurer other than a non-directive friendly society; and
  2. (2) a Swiss general insurer.


In this Part, the following definitions shall apply:

business risk

means any risk to a firm arising from changes in its business, including:

    1. (1) the risk that the firm may not be able to carry out its business plan and its desired strategy; and
    2. (2) risks arising from a firm's remuneration policy.


means the maximum loss which a firm might suffer if:

    1. (1) a counterparty or a group of connected counterparties fail to meet their obligations; or
    2. (2) the firm realises assets or off-balance sheet positions.

liquidity risk

means the risk that a firm, although solvent, either does not have available sufficient financial resources to enable it to meet its obligations as they fall due, or can secure such resources only at excessive cost.

mark to market

means valuation at readily available close out prices from independent sources.

mark to model

means any valuation which has to be benchmarked, extrapolated or otherwise calculated from a market input.

pension obligation risk

means the risk:

    1. (1) to a firm caused by its contractual or other liabilities to or with respect to a pension scheme (whether established for its employees or otherwise); and
    2. (2) that the firm will make payments or other contribution to or with respect to a pension scheme because of a moral obligation or because the firm considers that it needs to do so for some other reason.

regulatory surplus value

means the sum of:

    1. (1) the total capital after deductions of the undertaking; less
    2. (2) the individual capital resources requirement of the undertaking,


      1. (a) only the proportion of the total number of shares issued by the undertaking held, directly or indirectly, by the firm is to be taken into account, or
      2. (b) if the individual capital resources requirement of an undertaking that:
        1. (i) has a Part 4A permission; and
        2. (ii) is a subsidiary

exceeds total capital after deductions, then the full amount of the items referred to in (1) and (2) must be taken into account.

residual risk

means the risk that credit risk mitigation techniques used by the firm prove less effective than expected.

restricted assets

means assets of the undertaking which are subject to a legal restriction or other requirement having the effect that those assets cannot be transferred or otherwise made available to the firm for the purposes of the firm meeting its CR Requirement without causing a breach of that legal restriction or requirement.

securitisation risk

includes the risk that the capital resources held by a firm in respect of assets which it has securitised are inadequate having regard to the economic substance of the transaction, including the degree of risk transfer achieved.

specific valuation rule

means any rule in the Non-Solvency II Firms Sector of the PRA Rulebook that provides in particular circumstances for a particular method of recognition or valuation.