Amendments of the 1983 Regulations
34.—(1) In paragraph (1) of regulation 3 of the 1983 Regulations (interpretation), for the definition of “receivable” there shall be substituted—
““receivable”, in relation to a company, a financial year and a premium means due to the company in respect of contracts of insurance incepted during that financial year, whether or not the premium is received during that financial year;”.
(2) For regulation 4 of the 1983 Regulations (value of assets and amount of liabilities) there shall be substituted—
Value of assets and amount of liabilities
4.—(1) Unless otherwise provided in these Regulations, in the documents which a company is required to prepare in accordance with these Regulations—
(a)the value or amount given for an asset or a liability of the company shall be the value or amount of that asset or liability as determined in accordance with any applicable valuation regulations;
(b)where there are no applicable valuation regulations, then,
(i)in the case of an asset of the company other than a linked asset, the value given shall be the value which that asset would have if valuation regulations were applicable, and
(ii)in the case of a linked asset of the company, the value given shall be the value of that asset as determined in accordance with generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate for insurance companies.
(2) For the purposes of this regulation, references to applicable regulations shall be taken to be—
(a)such regulations as they apply on the date on which the documents are drawn up; or
(b)in respect of any financial year ending before 1st July 1996, at the option of the company (which must be exercised in respect of all its assets and liabilities), such regulations as they applied immediately before the Insurance Companies (Amendment) Regulations 1995(1) came into force.”
(3) For regulation 22B of the 1983 Regulations(2) (additional information and derivative contracts) there shall be substituted—
Additional information on derivative contracts
22B.—(1) Every company shall, in respect of the financial year in question, annex to the documents referred to in regulations 6, 7 and 8 above a statement comprising a brief description of—
(a)any investment guidelines operated by the company for the use of derivative contracts;
(b)any provision made by such guidelines for the use of contracts under which the company had a right or obligation to acquire or dispose of assets which was not, at the time when the contract was entered into, reasonably likely to be exercised and, if so, the circumstances in which, pursuant to that provision, such contracts would be used;
(c)the extent to which the company was during the financial year a party to any contracts of the kind described in sub-paragraph (b) above;
(d)the extent to which—
(i)any of the amounts recorded in Form 13; and
(ii)in the case of a company carrying on long term business, any of the amounts recorded in Form 45,
would be changed if assets which the company had a right or obligation to acquire or dispose of under derivative contracts outstanding at the end of the financial year (being, in the case of options, only those options which it would have been prudent to assume would be exercised) had been so acquired or disposed of;
(e)how different the information provided pursuant to sub-paragraph (d) above would have been if such options as were outstanding at the end of the year had been exercised in such a way as to change the amounts referred to in that sub-paragraph to the maximum extent;
(f)how different the information provided pursuant to sub-paragraph (d) above would have been if, instead of applying to contracts outstanding at the end of the financial year, that sub-paragraph had applied to derivative contracts outstanding at such other time during the financial year as would have changed the amounts referred to in that sub-paragraph to the maximum extent;
(g)the maximum loss which would be incurred by the company on the failure by any one other person to fulfil its obligations under derivative contracts outstanding at the end of the financial year, both under existing market conditions and in the event of other foreseeable market conditions, together with an assessment of whether such maximum loss would have been materially different at any other time during the financial year;
(h)the circumstances surrounding the use of any derivative contract held at any time during the financial year which does not fall within paragraph (2) of regulation 55 of, or (where appropriate) paragraph 15 of Schedule 10 to, the Insurance Companies Regulations; and
(i)the total value of any fixed consideration received by the company (whether in cash or otherwise) during the financial year in return for granting rights under derivative contracts and a summary of contracts under which such rights have been granted.
(2) In this regulation—
(a)“derivative contract” includes a contract or asset which has the effect of a derivative contract within the meaning of regulation 56 of the Insurance Companies Regulations and, for the purposes of paragraph (1)(h) above, such a contract or asset shall be treated as falling within paragraph (2) of regulation 55 of, or paragraph 15 of Schedule 2 to, the Insurance Companies Regulations, as appropriate, if it has the effect of a derivative contract which would fall within that paragraph; and
(b)“option” has the same meaning as in regulation 44(1) of the Insurance Companies Regulations.
(3) For the purposes of this regulation, a company which is a party to—
(a)a contract for differences; or
(b)any other contract which is to be, or may be, settled in cash,
shall be taken to have a right or obligation to acquire or dispose of the assets underlying the contract.”
(4) Form 11 in Schedule 1 to the 1983 Regulations (general business: calculation of required margin of solvency—first method) shall be amended by substituting, for the Note to the form, the following—
“Note
In respect of business not accounted for on a one year basis, the provision for claims outstanding brought forward at the beginning of the financial year in question and recorded in line 24, column 1 shall be computed as if it took account of all premiums receivable in respect of previous financial years, whether or not those premiums had been received at that date.”
(5) Form 12 in that Schedule (general business: calculation of required margin of solvency—second method, and statement of required minimum margin) shall be amended by substituting, for the Note to the form, the following—
Notes
1. If the company has not been in existence long enough to acquire a reference period, this shall be stated and lines 11 to 41 ignored.
2. In respect of business not accounted for on a one year basis, the provision for claims outstanding brought forward at the beginning of the reference period and recorded in line 24, column 1 shall be computed as if it took account of all premiums receivable in respect of previous financial years, whether or not those premiums had been received at that date.”
(6) Form 13 in Schedule 1 to the 1983 Regulations (balance sheet and profit and loss account) shall be amended as follows—
(a)in lines 21, 22 and 23, for the entry “Other variable interest investments”, there shall be substituted “Other variable yield investments”;
(b)in lines 21 and 22, for the entry “Equity shares except those in dependants which must be included in lines 29, 31 or 33”, there shall be substituted “Shares except those in dependants which must be included in lines 29, 31 or 33”;
(c)in line 23, for the entry “Holdings in authorised unit trust schemes and recognised schemes within the meaning of the Financial Services Act 1986(3)” there shall be substituted “Holdings in collective investment schemes within the meaning of the Financial Services Act 1986”;
(d)in Instruction 6(4), for the words “regulation 57(8C)(b) and (8E)” there shall be substituted “regulation 57(2)(b) or (3)”; and
(e)Instruction 7(5) shall be omitted.
(7) Form 13A in that Schedule(6) shall be amended as follows—
(a)for Instruction 6, there shall be substituted—
“6 All amounts included at lines 11 to 35 of Form 13A in respect of derivative contracts shall be determined without making any adjustment for the value of assets paid, received or transferred in pursuance of a condition in that contract or a related contract, whether by variation margin or otherwise. The aggregate effect of such assets paid, received or transferred shall be shown at line 41.”; and
(b)Instructions 7 and 8 shall be omitted.
(8) In Part I of Schedule 6 to the 1983 Regulations (certificates by directors etc.), at the end of sub-paragraph (d) of paragraph 1 for the full stop there shall be substituted a semi-colon and there shall be inserted the following sub-paragraph—
“and
(e)whether the value of the company’s assets and the amount of its liabilities have been determined in accordance with paragraph (2)(a) or paragraph (2)(b) of regulation 4 above.”
S.I. 1994/1515.
Regulation 22B was inserted by S.I. 1994/1515, reg. 9.
1986 c. 60; this entry was substituted by S.I. 1994/1515, reg. 15(5)(a).
This instruction was inserted by S.I. 1994/1515, reg. 15(5)(g) and amended by S.I. 1994/3133, reg. 19.
This instruction was inserted by S.I. 1994/1515, reg. 15(5)(g).
Form 13A was inserted by S.I. 1994/1515, reg. 15(6).