Prudential Regulation Authority Rulebook

6.1

A third country branch undertaking must establish adequate provisions to cover the insurance and reinsurance obligations assumed by the third country branch undertaking in the UK, calculated in accordance with 6.1A to 6.1E.

6.1A

A third country branch undertaking must calculate the provisions referred to in 6.1:

1. (1) such that the calculation makes use of and is consistent with information provided by the financial markets and generally available data on underwriting risks (market consistency);
2. (2) in a prudent, reliable and objective manner;
3. (3) taking into account the principles set out in Valuation 2 and 3; and
4. (4) subject to 6.1B, in accordance with:
   1. (a) 6.1C to 6.1F;
   2. (b) Technical Provisions 9 to 12;
   3. (c) Technical Provisions 14;
   4. (d) Technical Provisions – Further Requirements 2 to 5;
   5. (e) Technical Provisions – Further Requirements 10 to 12;
   6. (f) Technical Provisions – Further Requirements 23 and 24; and
   7. (g) Technical Provisions – Further Requirements 26 and 27
   8. where a reference to ‘technical provisions’ is to be interpreted as the provisions referred to in 6.1.

6.1B

In Technical Provisions – Further Requirements 2.1, the reference to ‘and the risk margin’ is to be disregarded.

6.1C

The insurance and reinsurance obligations referred to in 6.1 must be calculated using the branch best estimate unless 6.1E applies, in which case they must be calculated in accordance with 6.1E.

6.1D

The branch best estimate must be calculated in accordance with:

1. (1) Technical Provisions 3;
2. (2) Technical Provisions 5 and 8;
3. (3) the Matching Adjustment Part;
4. (4) Technical Provisions – Further Requirements 6 to 9 (other than 7.2);
5. (5) Technical Provisions – Further Requirements 13 to 21; and
6. (6) Technical Provisions – Further Requirements 25,

where a reference to ‘best estimate’ is to be interpreted as branch best estimate and a reference to ‘technical provisions’ is to be interpreted as the provisions referred to in 6.1.

6.1E

Where:

1. (1) future cash-flows associated with insurance or reinsurance obligations can be replicated reliably;
2. (2) that replication is provided using financial instruments; and
3. (3) those financial instruments have a reliable market value which is observable,

then the value of those future cash-flows must be determined on the basis of the market value of those financial instruments, and calculated in accordance with Technical Provisions – Further Requirements 22, where references to ‘Technical Provisions 2.5(2)(a)’ is to be interpreted as a reference to ‘6.1E of the Third Country Branches Part’ and references to ‘technical provisions’ are to be interpreted as the provisions referred to in 6.1.

6.1F

1. (1) A third country branch undertaking must ensure that the branch best estimate, and the assumptions underlying the calculation of the branch best estimate, are regularly compared against experience.
2. (2) Where the comparison in (1) identifies that a systematic deviation exists between the branch best estimate calculations and experience, the third country branch undertaking must make appropriate adjustments to the actuarial methods being used and/or the assumptions being made to ensure that the branch best estimate is calculated in accordance with 6.1A to 6.1D.

6.2

[Deleted.]

6.3

A third country branch undertaking must value assets and liabilities (other than the insurance and reinsurance obligations referred to in 6.1) in accordance with the Valuation Part where, except for Valuation 9.4(2)(a), a reference to ‘technical provisions’ is to be interpreted as the provisions referred to in 6.1, a reference to the ‘Technical Provisions Part’ is to be interpreted as a reference to ‘Third Country Branches 6’ and a reference to the ‘Solvency Capital Requirement – General Provisions Part’ can be disregarded.

6.4

6.5

[Note: Art. 165 of the Solvency II Directive]