The Insurance Companies (Amendment) Regulations 1990

Matching of assets and liabilities

5.—(1) In the Insurance Companies Regulations 1981, for regulation 25 (matching of assets and liabilities) substitute–

“Matching: general requirement

25.— (1) Where the liabilities of an insurance company in any particular currency exceed 5 per cent of the company’s total liabilities, the company shall hold sufficient assets in that currency to cover at least 80 per cent of the company’s liabilities in that currency.

(2) Where an insurance company carries on both long term and general business, the requirements of paragraph (1) apply to the assets and liabilities of each kind of business separately.

(3) For the purposes of this regulation–

• “assets”, except in the case of assets of the kind referred to in regulation 38(2) below, means assets valued in accordance with Part V of these Regulations; and

• “liabilities” means provision by an insurer to cover liabilities arising under or in connection with contracts of insurance (not being liabilities relating to insurance business excluded by regulation 27 below).

(4) For the purposes of this regulation references to assets in a currency shall be construed as references to assets expressed in or capable of being realised (without exchange risk) in that currency; and an asset is capable of being realised (without exchange risk) in a currency if it is reasonably capable of being realised in that currency without risk that changes in exchange rates would reduce the cover of liabilities in that currency.

(5) The provisions of this regulation have effect subject to the following regulations.”.

(2) After that regulation insert–

“Matching: property linked benefits

25A.— (1) In so far as the liabilities for property linked benefits are covered by assets which determine the benefits payable under a linked long term contract, regulation 25 above does not apply.

(2) In so far as the liabilities for property linked benefits are covered by assets in a currency other than that in which the insurer’s obligations to the policy holder are expressed, those liabilities shall for the purposes of regulation 25 be deemed to be liabilities in the first-mentioned currency.

(3) In this regulation “property linked benefits” has the meaning given by regulation 37(1) below.

Matching: currency of general business liabilities

25B.— (1) The currency of an insurance company’s general business liabilities shall, for the purposes of regulation 25 above, be determined as follows.

(2) Where the contract of insurance expresses any liability in terms of a particular currency, that liability shall be regarded as a liability in that currency.

(3) Where the liabilities are not so expressed, they shall be regarded as liabilities in the currency of the country in which the risk is situated or, if the company on reasonable grounds so determines, in the currency in which the premium payable under the contract is expressed.

(4) However, the company may regard its liabilities as liabilities in the currency which it will use in accordance with past experience or, in the absence of such experience, in the currency of the country in which it is established–

(a) for contracts covering risks falling within general business classes 4, 5, 6, 7, 11, 12 and 13 (producer’s liability only),

(b) for contracts covering risks falling within any other general business class where, in accordance with the nature of the risks, the company’s liabilities are liabilities in a currency other than that determined in accordance with paragraph (2) or (3).

(5) Where a claim has been notified to an insurance company and the company’s liability in respect of that claim is payable in a currency other than one which would result from the application of the above provisions, the liability shall be regarded as a liability in the currency in which the company is actually obliged to pay it.

(6) Where a claim is assessed in a currency which is known to the company in advance but which is different from a currency determined in accordance with the above provisions, the company may regard its liabilities as liabilities in that currency.

Matching: exception for certain general business liabilities

25C.— (1) The requirements of regulation 25 above have effect subject to the following provisions as regards a company’s general business.

(2) The company need not cover the liabilities of its general business by assets in a particular currency if those assets would amount to 7 per cent or less of the remainder of its assets in other currencies.

This paragraph is subject to paragraphs (3) and (4) below.

(3) During the periods specified below, paragraph (2) has effect in relation to liabilities required to be covered by assets in Greek drachmas, Irish pounds or Portuguese escudos as if the following amounts, if less than the percentage mentioned in that paragraph, were substituted for that percentage–

• Until 31st December 1992: 1 million ECU

• From 1st January 1993 until 31st December 1998: 2 million ECU.

(4) During the period until 31st December 1996, paragraph (2) has effect in relation to liabilities required to be covered by assets in Belgian francs, Luxembourg francs or Spanish pesetas as if the amount of 2 million ECU, if less than the percentage mentioned in that paragraph, were substituted for that percentage.”.

(3) For regulation 27 of the Insurance Companies Regulations 1981 (exclusions from requirements as to the matching and localisation of assets), substitute–

“Exclusions from regulations 25 and 26 27.

27.— (1) Nothing in regulation 25 or 26 above shall apply to–

(a) insurance business carried on outside the United Kingdom, or

(b) reinsurance business (unless it is facultative reinsurance written by an insurer who also carries on insurance business that is not reinsurance).

(2) Nothing in regulation 26 above shall apply to insurance business of groups 3 and 4 (within the meaning of Part II of Schedule 2 to the Insurance Companies Act 1982).”.