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Glossary

The Rulebook Glossary contains defined terms used in more than one Part across the PRA Rulebook.

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Term Definition Legal instruments for this definition

parent undertaking

01/01/2016

(in the Solvency II Firms Sector of the PRA Rulebook) means, in accordance with section 420 of FSMA (Parent and subsidiary undertaking) and section 1162 of the Companies Act 2006 (Parent and subsidiary undertakings), an undertaking which has the following relationship to another undertaking ("S"):

(1) it holds a majority of the voting rights in S; or

(2) it is a member of S and has the right to appoint or remove a majority of its board of directors; or

(3) it has the right to exercise a dominant influence over S through:

(a) provisions contained in S's memorandum or articles; or

(b) a control contract; or

(4) it is a member of S and controls alone, under an agreement with other shareholders or members, a majority of the voting rights in S; or

(5) (a) it has the power to exercise, or actually exercises, dominant influence or control over S; or

      (b) it and S are managed on a unified basis; or

(6) it is a parent undertaking of a parent undertaking of S; or

(7) (except as the Group Supervision Part of the PRA Rulebook applies to members of the Society or to the Society or managing agents in respect of members) it is incorporated in or formed under the law of another EEA State and is a parent undertaking within the meaning of any rule of law in that EEA State for purposes connected with implementation of the Council Directive of 13 June 1983 on consolidated accounts (No 83/349/EEC); or

(8) where, in accordance with Article 212(2) of the Solvency II Directive, it effectively exercises a dominant influence over S;

      and:

(9) in relation to (2) and (4), the undertaking will be treated as a member of S if any of its subsidiary undertakings is a member of S, or if any shares in S are held by a person acting on behalf of the undertaking or any of its subsidiary undertakings;

(10) the provisions of Schedule 7 to the Companies Act 2006 (Parent and subsidiary undertakings: supplementary provisions) explain the expressions used in and supplement paragraphs (1) to (6).

[Note: Art. 212(2) of the Solvency II Directive]

parent undertaking

01/01/2014

 This term is defined externally, please refer to -

s420 FSMA

Part 4A permission

01/02/2014

means a permission given by the FCA or PRA under Part 4A of FSMA (Permission to carry on regulated activities), or having effect as if so given.

partial internal model

01/01/2016

means an internal model that is:

(1) used to calculate one or more of the following:

(a) one or more risk modules, or sub-modules, of the basic SCR;

(b) the capital requirement for operational risk set out in Solvency Capital Requirement – Standard Formula 5;

(c) the adjustment for the loss-absorbing capacity of technical provisions and deferred taxes set out in Solvency Capital Requirement – Standard Formula 6; or

(2) applied to the whole of a firm's insurance business , or only to one or more of its major business units.

[Note: Art. 112(2) of the Solvency II Directive]

participating Solvency II undertaking

01/01/2016

means a Solvency II undertaking that holds a participation in another undertaking.

participating undertaking

01/01/2016

means an undertaking that holds a participation in another undertaking, or an undertaking linked with another undertaking by an Article 12(1) relationship.

[Note: Art. 212(1)(a) of the Solvency II Directive]

participation

01/01/2016

(in the Solvency II Firms Sector of the PRA Rulebook) means:

(1) the ownership, direct or by way of control, of 20% or more of the voting rights or capital of an undertaking; or

(2) where, in accordance with Article 212(2) of the Solvency II Directive, an undertaking effectively exercises a significant influence over another undertaking.

[Note: Art. 13(20) and 212(2) of the Solvency II Directive]

partner

02/04/2015

means (in relation to a firm which is a partnership) any person appointed to direct its affairs, including:

(1) a person occupying the position of a partner (by whatever name called); and

(2) a person in accordance with whose directions or instructions (not being advice given in a professional capacity) the partners are accustomed to act.

partnership

01/01/2016

 This term is defined externally, please refer to -

s417(1) FSMA

partnership scheme

01/01/2016

 This term is defined externally, please refer to -

s235A(5) FSMA

passported activity

02/04/2015

means an activity carried on by an EEA firm, or by a UK firm, under an EEA right

pension contract

01/01/2016

means a contract under which rights to benefits are obtained by the making of contributions to an occupational pension scheme or to a personal pension scheme, where the contributions are paid to a regulated collective investment scheme.

pension opt-out

03/08/2015

has the meaning given in the PRA Handbook as at 31 July 2015.

pension policy

01/01/2016

means a contract under which a right to benefits results from contributions made to an occupational pension scheme or to a personal pension scheme, where the contributions are paid to an insurer.

pension scheme

01/01/2016

means a scheme under which a right to benefits results from contributions made under a pension contract or pension policy.

pension transfer

03/08/2015

has the meaning given in the PRA Handbook as at 31 July 2015.

permanent health

01/01/2016

means the class of contract of insurance, specified in paragraph 4 of Part 2 of Schedule 1 to the Regulated Activities Order.

permanent share capital

01/01/2016

has the meaning set out in Insurance Company – Capital Resources 5.1.

permission

19/06/2014

means permission to carry on regulated activities.

person

29/04/2014

 This term is defined externally, please refer to -

Interpretation Act 1978 Schedule 1

personal pension scheme

03/08/2015

has the meaning provided in Article 3(1) of the Regulated Activities Order.

policy

01/10/2015

has the meaning given in article 2 of the Financial Services and Markets Act 2000 (Meaning of "Policy" and "Policyholder") Order 2001 (SI 2001/2361).

policyholder

01/10/2015

either:

(1) means, in respect of a contract of insurance where the insurance undertaking is a Solvency II undertaking, a policyholder which includes a beneficiary; or

(2) has the meaning given in article 3 of the Financial Services and Markets Act 2000 (Meaning of "Policy" and "Policyholder") Order 2001 (SI 2001/2361).

policyholder protection scheme

03/07/2015

means the compensation scheme for claims under contracts of insurance.

PPFM

01/01/2016

means the Principles and Practices of Financial Management which a firm carrying on with-profits insurance business must establish, maintain and record under COBS 20.3 of the FCA Handbook.

PRA

01/01/2014

means the Prudential Regulation Authority.

PRA approved person

07/03/2016

means a person approved by the PRA under section 59 of FSMA (Approval for particular arrangements) to perform a PRA senior management function.

PRA Handbook

19/06/2014

means the PRA’s Handbook of rules and guidance.

PRA senior management approval application

10/12/2018

means an application to perform a PRA senior management function under section 59 of FSMA.

PRA senior management function

10/12/2018

means:

(1) in respect of a CRR firm, a credit union and a third country CRR firm a function specified as a controlled function in Senior Management Functions 2 in relation to the carrying on of regulated activity by a firm.
(2) (in respect of a UK Solvency II firm, the Society, a managing agent, a third country branch undertaking (other than a Swiss general insurer) and a UK ISPV) that aspect of any key function relating to the carrying on of a regulated activity by the firm, which is specified by the PRA in Insurance – Senior Management Functions 3 to 10 pursuant to section 59 of FSMA.
(3) (in respect of a small non-directive insurer) any function which is specified by the PRA in Non-Solvency II Firms – Senior Management Functions 3 to 5 pursuant to section 59 of FSMA.
(4) (in respect of a large non-directive insurer and a Swiss general insurer) any function which is specified by the PRA in Large Non-Solvency II Firms – Senior Management Functions 3 to 9 pursuant to section 59 of FSMA.

PRA senior management function holder

10/12/2018

means a person who has been approved to perform a PRA senior management function in respect of the firm.

PRA-authorised person

15/02/2016

 This term is defined externally, please refer to -

FSMA s2B(5)

preference share

01/01/2016

means a share conferring preference as to income or return of capital which does not form part of the equity share capital of an undertaking.

premium

03/07/2015

means the consideration payable under a contract of insurance by the policyholder to the insurer.

premiums amount

01/01/2016

means an amount, as defined in Insurance Company – Capital Resources Requirements 8.1, used in the calculation of the general insurance capital requirement.

pre-Solvency II MCR

01/01/2016

means the minimum capital requirement that applied to the UK Solvency II firm under PRA rules as at 31 December 2015.

probability distribution forecast

01/01/2016

means a mathematical function that assigns a probability of realisation to an exhaustive set of mutually exclusive future events.

[Note: Art. 13(38) of the Solvency II Directive]

professional client

03/01/2018

has the meaning given in the FCA Handbook as amended from time to time.

proper valuation

01/01/2016

means, in relation to land, a valuation made by a qualified valuer not more than three years before the relevant date which determined the amount which would be realised at the time of the valuation on an open market sale of the land free from any mortgage or charge.

property-linked benefits

01/01/2016

means benefits other than an index-linked benefit:

(1) provided for under a linked long-term contract of insurance; and

(2) determined by reference to the value of, or income from, property of any description (whether specified in the contract or not).

property-linked liabilities

01/01/2016

means insurance liabilities in respect of property-linked benefits.

proportional share

01/01/2016

means, in relation to an affiliated company, the percentage which is the percentage holding (directly or indirectly) in the affiliated company’s capital.

protected claim

03/07/2015

means a claim which is covered by the policyholder protection scheme as defined in Policyholder Protection 9.1.

prudential context

02/04/2015

means, in relation to activities carried on by a firm, the context in which the activities have, or might reasonably be regarded as likely to have, a negative effect on:

(1) the safety and soundness of firms; or

(2) the ability of the firm to meet either:

(a) the "fit and proper" test in threshold conditions 4E and 5E (Suitability); or

(b) the applicable requirements and standards under the regulatory system relating to the firm’s financial resources.

pure protection contract

03/08/2015

means:

(1) a long-term insurance contract in respect of which the following conditions are met:

(a) the benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or infirmity;

(b) the contract has no surrender value, or the consideration consists of a single premium and the surrender value does not exceed that premium; and

(c) the contract makes no provision for its conversion or extension in a manner which would result in it ceasing to comply with (a) or (b); or

(2) a reinsurance contract covering all or part of a risk to which a person is exposed under a long-term insurance contract.

pure reinsurer

01/01/2016

means an insurer whose insurance business is restricted to reinsurance.