Prudential Regulation Authority Rulebook

1.

The equity index upon which the symmetric adjustment to the standard equity capital charge is to be based must comply with all of the following requirements:

1. (1) the equity index measures the market price of a diversified portfolio of equities which is representative of the nature of equities typically held by UK Solvency II undertakings;
2. (2) the level of the equity index is publicly available; and
3. (3) the frequency of published levels of the equity index is sufficient to enable the current level of the index and its average value over the last 36 months to be determined.

2.

Subject to 3D12.4, a firm must calculate the symmetric adjustment in accordance with the following formula:

$$SA=\frac{1}{2}\cdot (\frac{CI-AI}{AI}-8\mathrm{\%})$$

where:

1. (a) CI denotes the current level of the equity index; and
2. (b) AI denotes the weighted average of the daily levels of the equity index over the last 36 months.

3.

For the purposes of calculating the weighted average of the daily levels of the equity index, the weights for all daily levels must be equal and the days during the last 36 months in respect of which the index was not determined must not be included in the average.

4.

The symmetric adjustment must not be lower than -10% or higher than 10%.