Prudential Regulation Authority Rulebook

4.1

The methodology used within the capital assessment should allow a firm to quantify the financial effect of risks. It should also reflect the nature of a firm's business and be consistent with the way in which a firm identifies and manages risk.

4.2

A firm’s capital assessment should:

• reflect the firm's assets, liabilities, and future business plans;
• be consistent with the firm's management practice, systems and controls;
• consider all material risks that may have an impact on the firm's ability to meet its liabilities to policyholders; and
• use a valuation basis that is consistent throughout the assessment.

4.3

The results of the capital assessment should be supplemented by analysis of the sources of the risks to which the firm is exposed, discussion of the events which are most likely to threaten the safety and soundness of the firm and the potential mitigating actions which the firm may take to manage them.