Prudential Regulation Authority Rulebook

3.1

This Chapter does not apply:

1. (1) to a pure reinsurer; or
2. (2) in respect of linked assets.

3.2

1. (1) A firm must hold admissible assets in each currency of an amount equal to at least 80% of the amount of its liabilities in that currency arising under or in connection with contracts of insurance, except where the amount of those assets does not exceed 7% of the assets in other currencies.
2. (2) For the purposes of (1), references to an asset in a currency are to an asset which is expressed in or capable of being realised (without exchange risk) in that currency, and an asset is capable of being so realised if it is reasonably capable of being realised in that currency without risk that changes in exchange rates would reduce the cover for liabilities in that currency.

3.3

For the purposes of 3.2, the currency of the liability under a contract of insurance is the currency in which the cover under the contract of insurance is expressed or, if the contract does not specify a currency:

1. (1) the currency of the country or territory in which the risk is situated;
2. (2) if the firm on reasonable grounds so decides, the currency in which the premium payable under the contract is expressed;
3. (3) if, taking into account the nature of the risks insured, the firm considers it more appropriate:
1. (a) the currency (based on past experience) in which it expects the claims to be paid; or
2. (b) if there is no past experience, the currency of the country or territory in which the firm or relevant branch is established:
1. (i) for contracts covering risks falling within general insurance business classes 4, 5, 6, 7, 11, 12 and 13 (producer's liability only); and
2. (ii) for contracts covering risks falling within any other general insurance business class where, in accordance with the nature of the risks, the firm's liabilities are liabilities to be provided in a currency other than that which would result from the application of (1) or (2);
4. (4) (where a claim has been notified to the firm and the firm's liability in respect of that claim is payable in a currency other than that which would result from the application of (1), (2) or (3)) the currency in which the claim is to be paid; or
5. (5) (where a claim is assessed in a currency known to the firm in advance and is a currency other than that which would result from the application of (1), (2), (3) or (4)) the currency in which the claim is to be assessed.