Prudential Regulation Authority Rulebook

1.

A firm must calculate the capital requirement for motor vehicle liability risk as equal to the loss in its basic own funds that would result from an instantaneous loss that, without deduction of the amounts recoverable from reinsurance contracts and special purpose vehicles, is calculated in accordance with the following formula in GBP:

$$L_{motor}=max(5,300,000;44,000\cdot \sqrt{N_a+0.05\cdot N_b+0.95\cdot min(N_b;20,000)})$$

where:

1. (1) N_a is the number of vehicles insured by the firm in lines of business 4 and 16 with a deemed policy limit above GBP 21,200,000; and
2. (2) N_b is the number of vehicles insured by the firm in lines of business 4 and 16 with a deemed policy limit below or equal to GBP 21,200,000.

2.

The number of motor vehicles covered by the proportional reinsurance obligations of the firm must be weighted by the relative share of the firm’s obligations in respect of the sum insured of the motor vehicles.

3.

The deemed policy limit referred to in 3A18.1 must be:

1. (1) the overall limit of the motor vehicle liability insurance policy or, where no such overall limit is specified in the terms and conditions of the policy, the sum of the limits for damage to property and for personal injury; or
2. (2) where the policy limit is specified as a maximum per victim, based on the assumption of ten victims.