6

Transfers of Insurance Business

6.1

Within two months of the effective date of any transfer event, a firm must:

  1. (1) where a firm so elects, update its dynamic insurance and reinsurance obligations by designating specific qualifying insurance and reinsurance obligations assumed by the firm as a result of the transfer event that are MA-eligible insurance and reinsurance obligations;
  2. (2) update the values of ‘ZA’, ‘ZB’ and ‘C0’ used in 5 to reflect any change in the firm’s qualifying insurance and reinsurance obligations; and
  3. (3) calculate ‘Wr’ as at the effective date of the transfer event using the updated values derived from the steps taken in (1) and (2).

6.2

The updates under 6.1(1) and (2) must not result in any increase in the aggregate amount of TMTP claimed by the firms that are parties to the transfer event, such that:

  1. (1) where the firm’s technical provisions increase as a result of the transfer event, the positive difference calculated in accordance with 6.3(3) must be no greater than the amount of TMTP that applied to the qualifying insurance and reinsurance obligations covered by such transfer event immediately prior to its effective date; or
  2. (2) where the firm’s technical provisions decrease as a result of the transfer event, the positive difference calculated in accordance with 6.3(3) must be no less than the amount of TMTP that applied to the qualifying insurance and reinsurance obligations covered by such transfer event immediately prior to its effective date.

6.3

For the purpose of calculating the positive difference referred to in 6.2, a firm must perform the following steps in sequence:

  1. (1) Calculate the output of the TMTP method as at immediately prior to the transfer event.
  2. (2) Calculate the output of the TMTP method as at the effective date of the transfer event using any updated value derived from 6.1(1) to calculate the dynamic portion, and using the values derived from the steps in 6.1(2) and (3).
  3. (3) Find the positive difference between the outputs calculated under 6.3(1) and (2).

6.4

A firm must use the same value for ‘M’ in each of the calculations referred to in 6.1(3) and 6.3(1) and (2).

6.5

A firm must submit to the PRA an explanation of any update to the dynamic insurance and reinsurance obligations in accordance with 6.1(1), the methods used to update ‘ZA’, ‘ZB’ and ‘C0’ in accordance with 6.1(2) and the calculations referred to in 6.3 as soon as possible and in any case no later than three months following the transfer event.