Prudential Regulation Authority Rulebook

1.

A firm must calculate the capital requirement for fire risk as equal to the loss in its basic own funds that would result from an instantaneous loss of an amount equal to the sum insured by the firm with respect to the largest fire risk concentration.

2.

The largest fire risk concentration of a firm is the set of buildings with the highest sum insured, after deduction of the amounts that the firm can recover from reinsurance contracts and special purpose vehicles, that meets all of the following requirements:

1. (1) the firm has insurance or reinsurance obligations in lines of business 7 and 19, in relation to each building that cover damage due to fire or explosion, including as a result of terrorist attacks; and
2. (2) all buildings are partly or fully located within a radius of 200 metres.

3.

In determining the sum insured for a set of buildings, a firm must only take into account reinsurance contracts and special purpose vehicles that would pay out in the event of insurance claims related to that set of buildings and must not take into account reinsurance contracts and special purpose vehicles where payout is dependent on insurance claims that are not related to that set of buildings.

4.

Where the deduction of amounts recoverable would lead to a capital requirement for fire risk that insufficiently captures the fire risk that the firm is exposed to, the firm must calculate the sum insured for a set of buildings without the deduction of amounts recoverable.

5.

For the purposes of 3A21.2 to 3A21.4, the set of buildings may be covered by one or several contracts of insurance or reinsurance contracts.