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11. For regulation 56 of the 1994 Regulations (other assets), substitute—
56.—(1) Subject to paragraph (3) below, for the purposes of this Part of these Regulations, a contract has the effect of a derivative contract if it is a contract (other than a derivative contract) which provides whether upon the exercise of a right by the insurance company or otherwise—
(a)for payment (at any time) of amounts which are determined by fluctuations in the value of property of any description or fluctuations in an index of the value of property of any description;
(b)for delivery of an asset other than an asset for the valuation of which provision is made in regulation 50 of these Regulations to or by the insurance company; or
(c)for the conversion of an asset held by the insurance company or another party to—
(i)an asset of a different type; or
(ii)a different asset of the same type.
(2) Subject to paragraph (3) below, for the purposes of this Part of these Regulations an asset has the effect of a derivative contract if the asset is an asset (other than an approved security or an asset falling within paragraph (a) of regulation 52 above) and the holding of the asset confers contractual rights or imposes contractual obligations to make or accept payment, delivery or conversion as set out in sub-paragraphs (a) to (c) of paragraph (1) above.
(3) A contract or asset does not have the effect of a derivative contract by reason only that—
(a)it provides for the unconditional delivery of assets, or for the payment for unconditional delivery of assets, such delivery or payment to be made within a period commencing at the date of the contract and extending—
(i)in the case of a listed security, for the usual period for delivery or payment as determined by the rules of the stock exchange or regulated market on which the securities are listed or facilities for dealing have been granted;
(ii)in any other case, for twenty working days;
(b)it is a contract of the type described in regulation 45(8) above in respect of which the conditions set out in regulation 45(9) above have been satisfied; or
(c)it is a transaction to which regulation 47A(1) above applies.
(4) Rights in respect of a contract or asset which has the effect of a derivative contract shall—
(a)in the case of a contract or asset having the effect of a derivative contract to which regulation 55 above applies, be valued in accordance with regulation 55(1) above; and
(b)in the case of a contract or asset having the effect of a derivative contract to which regulation 55 above does not apply, have a value not exceeding an amount calculated in accordance with regulation 48 above.
(5) For the purposes of paragraph (4) above, a contract or an asset has the effect of a derivative contract which is listed or transacted with an approved counterparty if it is itself so listed or transacted.”
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