PART 2Authorisation and supervision of insurance risk transformation
Amendment of FSMA4
1
FSMA is amended as follows.
2
In Schedule 6 (threshold conditions) M1—
a
in Part 1D (Part 4A permission: conditions for which the PRA is responsible in relation to insurers etc), in paragraph 4A (introduction), after sub-paragraph (4), insert—
5
If the person concerned (“C”) carries on, or is seeking to carry on, regulated activities which consist of or include a PRA-regulated activity relating to an assumption of risk falling within article 13A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, the threshold conditions which are relevant to the discharge by the PRA of its functions in relation to C are the conditions set out in paragraphs 4B to 4F, subject to sub-paragraph (6).
6
Paragraphs 4B to 4F have effect in relation to persons of the kind specified by sub-paragraph (5) as if—
a
the persons are special purpose vehicles within the meaning given by Article 13(26) of the Solvency 2 Directive M2;
b
the persons are not reinsurance undertakings within the meaning given by Article 13(4) of the Solvency 2 Directive;
c
references to contracts of insurance are references to contracts for the assumption of risk; and
d
references to C's policyholders are references to undertakings from whom C assumes a risk.
b
in Part 1E (Part 4A permission: conditions for which the PRA is responsible in relation to other PRA-authorised persons), in paragraph 5A (introduction)—
i
at the end of sub-paragraph (b), omit “or”;
ii
at the end of sub-paragraph (c), insert “
or
”
; and
iii
after sub-paragraph (c), insert—
d
an assumption of risk falling within article 13A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001,
Amendment of the Regulated Activities Order5
1
The Regulated Activities Order is amended as follows.
2
After article 12A (information society services and managers of UCITS and AIFs) M3 insert—
Transformer vehicles: insurance risk transformation12B
A transformer vehicle M4 does not carry on an activity of a kind specified by article 10 by assuming a risk from an undertaking, provided the assumption of the risk is a specified kind of activity falling within article 13A (transformer vehicles: insurance risk transformation).
3
After article 13 (application of sections 327 and 332 of FSMA) insert—
CHAPTER 3AInsurance risk transformation
13ATransformer vehicles: insurance risk transformation
It is a specified kind of activity for a transformer vehicle to assume a risk from an undertaking where—
a
the undertaking assumes a risk under a contract of insurance (“the underlying risk”); and
b
the assumption of risk by the transformer vehicle has the legal or economic effect of transferring some or all of the underlying risk to the transformer vehicle.
4
After article 19 (risk-management) M6 insert—
Transformer vehicles: insurance risk transformation19A
A transformer vehicle does not carry on an activity of a kind specified by article 14 by assuming a risk from an undertaking, provided the assumption of the risk is a specified kind of activity falling within article 13A (transformer vehicles: insurance risk transformation).
Amendment of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 20136
In the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 M7 in article 2 (regulated activities which are PRA-regulated activities), after paragraph (c) insert—
ca
the activity carried out by a transformer vehicle when it assumes a risk from an undertaking, as specified by article 13A of the Regulated Activities Order;
Limitation on transformer vehicles' activities7
1
When the PRA gives permission under Part 4A of FSMA for a transformer vehicle to carry on regulated activities, the PRA must exercise its discretion under section 55F(4)(a) of FSMA to incorporate in the description of those regulated activities a limitation on the scope of the regulated activities which the transformer vehicle may carry on.
2
The limitation on the scope of the regulated activities referred to in paragraph (1) must be determined by reference to some or all of the activities described in the application for Part 4A permission made by or on behalf of the transformer vehicle.
3
Where—
a
the PRA proposes to exercise its discretion under section 55F(4)(a) of FSMA pursuant to the duty imposed on the PRA by paragraph (1); and
b
the person applying for Part 4A permission consents to the proposed exercise of that discretion,
the PRA need not give a warning notice relating to the proposed exercise of that discretion pursuant to section 55X(1)(a) of FSMA.
4
Where—
a
the PRA decides to exercise its discretion under section 55F(4)(a) of FSMA pursuant to the duty imposed on the PRA by paragraph (1); and
b
the person applying for Part 4A permission consents to the exercise of that discretion,
the PRA need not give a decision notice relating to the exercise of that discretion pursuant to section 55X(4)(a) of FSMA.
5
After the PRA has given permission under Part 4A of FSMA for a transformer vehicle to carry on regulated activities, the PRA may exercise its discretion under section 55I(1)(c) or 55J(3)(a) of FSMA to vary the limitation referred to in paragraph (1), provided the PRA maintains a limitation on the scope of the regulated activities which the transformer vehicle may carry on.
6
A variation to the limitation referred to in paragraph (5) must ensure that the limitation is determined by reference to some or all of the activities which the transformer vehicle carries on or proposes to carry on.
Disapplication of Part 12 of FSMA8
Part 12 of FSMA (control over authorised persons) M8 does not apply in relation to a person who decides to acquire or increase control, or reduce or cease control, over a transformer vehicle carrying on the activity specified in article 13A of the Regulated Activities Order.
Transformer vehicles which are not Solvency 2 special purpose vehiclesF19
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .