Guidance

1. The features described in Rule 3.6.1(1) have the potential to expose an Insurer to risks that are not adequately provided for in the capital adequacy and solvency framework set out in this Rulebook. The Regulator retains the power to prohibit or limit the inclusion of such features in a Long-Term Insurance contract where it is of the view that the inclusion of such features may have a materially adverse impact upon the long term viability of the Insurer. It is natural for Insurers to seek to stimulate a market by offering features such as guarantees or options. However, the solvency of Insurers could be threatened if they have not adequately valued, stress-tested and set aside adequate capital to service such features. Therefore, the Regulator will expect Insurers seeking permission to write contracts with such features to demonstrate that these steps have been undertaken, and that their procedures provide adequately for ongoing monitoring of the associated risks. Permission to undertake such business may be subject to conditions, for example, a requirement to maintain additional capital, or to restrict business of this nature to a specific proportion of its total business. The Regulator may also as a condition of granting permission require additional information relating to the business in question to be reported to the Regulator in the Insurer's periodic Regulatory Returns, or in the Actuary's report referred to in Rule 7.3.4.
Amended on (3 February, 2020).