The Friendly Societies (Insurance Business No. 2) Regulations 1993

Required margin of solvency

4.—(1) The margin of solvency of a society is the excess of the value of its assets over the amount of its liabilities determined in accordance with Parts IV and V of these Regulations.

(2) Subject to paragraphs (3) to (5) below, the margin of solvency to be maintained by a society to which this Part of these Regulations applies pursuant to section 48 of the 1992 Act (referred to in these Regulations as “the required margin of solvency”) shall be determined–

(a) with respect to a society which carries on long term business, in accordance with Schedule 1; and

(b) with respect to a society which carries on general business, by taking the greater of the two sums resulting from the application of the two methods of calculation set out in Schedules 2 and 3 respectively.

(3) For a contract to which section 117(4) of the 1992 Act applies, the required margin of solvency shall be determined by taking the aggregate of the results arrived at by applying–

(a) in the case of so much of the contract as is within any class of long term business, the appropriate method prescribed by Schedule 1 for that class; and

(b) in the case of so much of the contract as is within general business class 1 or 2, the method of calculation set out in Schedule 2 (excluding paragraphs 7, 8 and 9).

(4) Where a society carries on long term business and owing to the nature of that business more than one margin of solvency is produced in respect of that business by the operation of this Part of these Regulations, the margins in question shall be aggregated as regards the society in order to arrive at its required margin of solvency for long term business.

(5) Where a society carries on both long term and general business and is accordingly required to maintain separate margins of solvency in respect of the two kinds of business–

(a) these Regulations shall apply for determining the margin of solvency for each kind of business separately, and

(b) assets other than those representing the funds maintained by the society in respect of its long term business, if they are not included among the assets covering the liabilities and the margin of solvency relating to the society’s general business, may be included among the assets taken into account in covering the liabilities and the margin of solvency for the society’s long term business.