1

Application and Definitions

1.1

This Part applies to:

  1. (1) a UK Solvency II firm;
  2. (2) the Society, in accordance with Insurance General Application 3; and
  3. (3) managing agents, in accordance with Insurance General Application 3.

1.2

In this Part, the following definitions shall apply:

base TMTP

is the figure calculated in accordance with 4.2(2).

dynamic insurance and reinsurance obligations

means the qualifying insurance and reinsurance obligations designated by the firm in accordance with 4.2(1) and 6.1(1).

dynamic portion

means the amount (which may be negative) of the best estimate for any dynamic insurance and reinsurance obligations less any amounts recoverable from reinsurance contracts and special purpose vehicles in respect of those obligations.

INSPRU 7

means the rules and guidance known as INSPRU 7 (individual capital assessment) in the PRA’s Prudential Sourcebook for Insurers as at 31 December 2015, made or treated as having been made by the PRA on 7 March 2013 under FSMA and the Financial Services Act 2012 (Transitional Provisions) (Rules and Miscellaneous Provisions) Order 2013.

MA-eligible insurance and reinsurance obligations

means the qualifying insurance and reinsurance obligations for which the technical provisions are calculated in accordance with Technical Provisions 2.5(1) and which comply with Matching Adjustment 2.2(1) to 2.2(4), 2.3 and 2.4 for a particular firm. For the purpose of this definition, references to relevant portfolio of insurance or reinsurance obligations in the Matching Adjustment Part are to be treated as references to qualifying insurance and reinsurance obligations.

non-dynamic portion

means the amount that is the sum of:

  1. (1) the amount (which may be negative) of the best estimate for any qualifying insurance and reinsurance obligations for which the technical provisions are calculated in accordance with Technical Provisions 2.5(1) other than any dynamic insurance and reinsurance obligations; and
  2. (2) the amount of any of the firm’s technical provisions to which the TMTP Permission relates calculated in accordance with Technical Provisions 2.5(2),

in both cases less any amounts recoverable from reinsurance contracts and special purpose vehicles in respect of those obligations.

qualifying insurance and reinsurance obligations

means insurance and reinsurance obligations for which the technical provisions are subject to a TMTP Permission.

qualifying reinsurance contract

means a proportional reinsurance contract between two UK Solvency II firms:

  1. (1) which transfers to the reinsurer a 100% share of the ceding firm’s risk under the reinsured contracts of insurance;
  2. (2) where the ceding firm has TMTP Permission in relation to the technical provisions for its insurance and reinsurance obligations under the contracts of insurance referred to in (1); and
  3. (3) which is legally binding and enforceable in all relevant jurisdictions.

risk margin portion

means, in relation to a firm’s technical provisions calculated in accordance with Technical Provisions 2.5(1) to which a TMTP Permission relates, the amount of the risk margin.

TMTP method

means the method set out in 5.1 for calculating the amount of TMTP, as updated following any transfer event in accordance with the requirements set out in 6.

transfer event

means:

  1. (1) a transfer of qualifying insurance and reinsurance obligations;
  2. (2) the transfer of risk under a qualifying reinsurance contract;
  3. (3) an amendment to a qualifying reinsurance contract that results in a change to the volume of the risks ceded to the reinsurer under such qualifying reinsurance contract; or
  4. (4) the cancellation, expiration, termination, or commutation of a qualifying reinsurance contract.