Prudential Regulation Authority Rulebook

2.1

This Chapter only applies to an incorporated friendly society.

2.2

A firm must ensure that:

1. (1) its liabilities under contracts of insurance, other than linked long-term liabilities, are covered by assets of appropriate safety, yield and marketability having regard to the classes of business it carries on; and
2. (2) its investments, other than those in respect of linked long-term liabilities, are appropriately diversified and adequately spread and excessive reliance is not placed on investments of any particular category or description.

2.3

A firm must cover its insurance liabilities in respect of its linked long-term liabilities as closely as possible with:

1. (1) where the linked benefits are linked to the value of units, those units;
2. (2) where the linked benefits are linked to the value of assets contained in an internal fund of the firm:
1. (a) in a case where the internal fund is divided into notional units, the assets represented by those notional units; or
2. (b) in a case where notional units are not established, those assets; and
3. (3) where the linked benefits are linked to a share index or other reference value not mentioned in (1) or (2), assets of appropriate security and marketability which correspond as closely as possible to the assets on which the reference value is based.