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Application provision

1.1 Unless otherwise stated, this Part applies to:

  1. (1) a UK Solvency II firm; and
  2. (2) in accordance with Insurance General Application 3, the Society, as modified by 8.

6.1

01/01/2016

The adjustment for the loss-absorbing capacity of technical provisions and deferred taxes as referred to in 2.1(3):

  1. (1) must reflect potential compensation of unexpected losses through a simultaneous decrease in technical provisions or deferred taxes, or a combination of the two; and
  2. (2) must take account of the risk-mitigating effect provided by future discretionary benefits of contracts of insurance.

Additional Notes


[Note: Art. 108 of the Solvency II Directive]

6.2

01/01/2016

For the purposes of 6.1(2):

  1. (1) a firm must take account of the risk-mitigating effect provided by future discretionary benefits to the extent that it can establish that a reduction in future discretionary benefits may be used to cover unexpected losses when they arise;
  2. (2) the risk-mitigating effect provided by future discretionary benefits must be no higher than the sum of technical provisions and deferred taxes relating to those future discretionary benefits; and
  3. (3) the value of future discretionary benefits under adverse circumstances must be compared to the value of those benefits under the underlying assumptions of the best estimate calculation.

Additional Notes


[Note: Art. 108 of the Solvency II Directive]