Prudential Regulation Authority Rulebook

1.

Where a firm transfers risk other than in the cases referred to in 3G5.1, including transfers through the purchase or issuance of financial instruments, the firm may only take that risk-mitigation technique into account in the calculation of the basic SCR if the qualitative criteria provided in 3G6.2 to 3G6.5 are met, in addition to the qualitative criteria set out in 3G2 and 3G3.

2.

The risk-mitigation technique must be consistent with the firm’s written policy on risk management, as referred to in Conditions Governing Business 2.5.

3.

The firm must be able to value the assets and liabilities that are subject to the risk-mitigation technique and, where the risk-mitigation technique includes the use of financial instruments, the firm must be able to value the financial instruments reliably in accordance with Valuation 2.1 to 2.2.

4.

Where the risk-mitigation technique includes the use of financial instruments, the financial instruments must have a credit quality which has been assigned to credit quality step 3 or better in accordance with 1A to 1C.

5.

Where the risk-mitigation technique is not a financial instrument, the counterparties to the risk-mitigation technique must have a credit quality which has been assigned to credit quality step 3 or better in accordance with 1A to 1C.