Overall Limitation of Credit Risk | Prudential Regulation Authority Handbook & Rulebook
Prudential Regulation Authority Rulebook

Prudential Regulation Authority Rulebook

Part

Insurance Company – Exposure Limits

Chapter

Overall Limitation of Credit Risk

Printed on: 14/06/2025

Rulebook at: 01/01/2016


2

Overall Limitation of Credit Risk

2.1

Taking into account all relevant risks, a firm must restrict its counterparty exposures and asset exposures to prudent levels and ensure that those exposures are adequately diversified.

  • 01/01/2016

2.2

If a firm elects under 9.3 to make a deduction in respect of collateral, the firm must deduct from the loss so much of the value of that collateral as:

  1. (1) would be realised by the firm were it to exercise its rights in relation to the collateral; and
  2. (2) does not exceed any of the relevant limits in 7.4.
  • 01/01/2016

2.3

For the purposes of 2.1 and of determining counterparty exposure, asset exposure and reinsurance exposure, a firm must:

  1. (1) only rely upon a loss mitigation technique where it has good reason to believe that, taking into account the possible circumstances of default, it is likely to be effective; and
  2. (2) not rely upon preferential access to assets unless it has taken into account appropriate professional advice as to its effectiveness.
  • 01/01/2016