Prudent Person Principle: Additional Requirements for Assets Covering Linked Long-Term Liabilities


This Chapter does not apply to a pure reinsurer.


In addition to the requirements set out in 2.1 and 3.1, where a firm carries out linked long-term contracts of insurance, it must also satisfy the requirements in 4.3.


Where 4.2 applies, the firm must cover its technical provisions in respect of its linked long-term liabilities as closely as possible with:

  1. (1) where the linked benefits are linked to the value of units, those units;
  2. (2) where the linked benefits are linked to the value of assets contained in an internal fund of the firm:
    1. (a) in a case where the internal fund is divided into notional units, the assets represented by those notional units; or
    2. (b) in a case where notional units are not established, those assets; and
  3. (3) where the linked benefits are linked to a share index or other reference value not mentioned in (1) or (2), assets of appropriate security and marketability which correspond as closely as possible to the assets on which the reference value is based.

[Note: Art. 132(3) of the Solvency II Directive]