Insurance – Supervised Run Off

1.1

This Part applies to SRO insurers.

1.2

In this Part, the following definitions shall apply:

end date

means the end of the relevant period determined in accordance with regulation 41 of the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018.

material transaction

means a transaction (when aggregated with any similar transactions) in which:

1. (1) the price actually paid or received for the transfer of assets or liabilities or the performance of services; or
2. (2) the price which would have been paid or received had that transaction been negotiated at arm's length between unconnected parties;
3. exceeds:
1. (a) in the case of a firm which carries on long-term insurance business, but not general insurance business, the sum of €20,000 and 5% of the firm's liabilities arising from its long-term insurance business, excluding linked long-term liabilities and net of reinsurance ceded; or
2. (b) in the case of a firm which carries on general insurance business, but not long-term insurance business, the sum of €20,000 and 5% of the firm's liabilities arising from its general insurance business, net of reinsurance ceded; or
3. (c) in the case of a firm which carries on both long-term insurance business and general insurance business:
1. (i) where the transaction is in connection with the firm's long-term insurance business, the sum of €20,000 and 5% of the firm's liabilities arising from its long-term insurance business, excluding linked long-term liabilities and net of reinsurance ceded; and
2. (ii) in all other cases, the sum of €20,000 and 5% of the firm's liabilities arising from its general insurance business, net of reinsurance ceded.
4. and
5. (d) a reference to the “firm's liabilities” is to be interpreted as a reference only to the liabilities relevant to the operations permitted under regulation 28 or 34 of Part 6 of the EEA Passport Rights (Amendment etc. and Transitional Provisions (EU Exit) Regulations 2018.

scheme of operations

1. means a scheme which:
1. (1) describes the nature of the risks which the insurer is underwriting, or intends to underwrite, and the guiding principles which it intends to follow in reinsuring or covering those risks; and
2. (2) contains the information required under 3.1.

2.1

A firm must, within 28 days of the date on which the firm becomes a SRO firm, submit a run-off plan to the PRA including:

1. (1) a scheme of operations, in accordance with 3; and
2. (2) an explanation of how, or to what extent:
1. (a) all liabilities to policyholders will be met in full as they fall due; and
2. (b) the firm will have ceased effecting contracts of insurance and carrying out contracts of insurance by the end date.

3.1

In accordance with 3.2, a scheme of operations must:

1. (1) describe the firm's run-off strategy;
2. (2) include a description of the business underwritten by the firm;
3. (3) in the case of third country branch undertakings, include financial projections (including appropriate scenarios and stress-tests) as follows:
1. (a) a forecast summary profit and loss account in accordance with 3.3;
2. (b) a forecast summary balance sheet in accordance with 3.4; and
3. (c) forecast MCR and SCR at the end of each financial year or part financial year;
4. (4) as at the end of each financial year which falls (in whole or part) within the period to which the scheme of operations relates:
1. (a) in the case of third country branch undertakings, identify any material transactions proposed to be entered into or carried out with, or in respect of, any associate or any other person with whom the firm has close links; and
2. (b) describe the assumptions which underlie those forecasts and the reasons for adopting those assumptions; and
5. (5) cover the run-off period until all liabilities to policyholders will be met in full or otherwise transferred.

3.2

The information required by 3.1 must:

1. (1) in the case of third country branch undertakings, reflect the nature and content of the rules relating to eligible own funds applicable to a firm;
2. (2) where a firm carries on both long-term insurance business and general insurance business, be separated for long-term insurance business and general insurance business; and
3. (3) in the case of third country branch undertakings, take account only of matters relevant to the operations effected by the third country branch.

3.3

The forecast summary profit and loss account referred to in 3.1(3)(a) must contain the following information:

1. (1) premiums and claims (gross and net of reinsurance) analysed by accounting class of insurance business;
2. (2) investment return;
3. (3) expenses;
4. (4) other charges and income;
5. (5) taxation; and
6. (6) dividends paid and accrued.

3.4

The forecast summary balance sheet referred to in 3.1(3)(b) must contain the following information:

1. (1) investments analysed by type;
2. (2) assets held to cover linked long-term liabilities;
3. (3) other assets and liabilities separately identifying cash at bank and in hand;
4. (4) capital and reserves analysed into called up share capital or equivalent funds, share premium account, revaluation reserve, other reserves and profit and loss account;
5. (5) subordinated liabilities;
6. (6) the fund for future appropriations;
7. (7) technical provisions gross and net of reinsurance analysed by accounting class of insurance business and separately identifying the provision for linked long-term liabilities, unearned premiums, unexpired risks and equalisation; and
8. (8) other liabilities and credits.

4.1

A firm must:

1. (1) notify the PRA at least 28 days before entering into or carrying out any material transaction with, or in respect of, an associate or any other person with whom the firm has close links, unless that transaction is in accordance with a scheme of operations which has been submitted to the PRA;
2. (2) notify the PRA promptly of any matter which has happened or is likely to happen and which represents a significant departure from the scheme of operations and either:
1. (a) explain the nature of the departure and the reasons for it and in the case of third country branch undertakings, provide revised forecast financial information in 3.1(3) in the scheme of operations for its remaining term; or
2. (b) include an amended scheme of operations and explain the amendments and the reasons for them.

4.2

A firm must, at least annually, update the PRA in writing on progress against, or deviation from, the firm’s run-off plan submitted in accordance with 2.

5.1

This Chapter applies to third country branch undertakings.

5.2

In this Part, reference to “SCR”, “MCR” and “technical provisions” is to be interpreted in accordance with Third Country Branches 10.2(1) to (3).