Prudential Regulation Authority Rulebook

8.1

This Chapter does not apply to a firm that has not been in existence long enough to acquire a reference period.

8.2

A firm must calculate a claims basis solvency margin by applying the calculation in 8.3 to 8.9.

8.3

If the provision for claims outstanding at:

1. (1) the end of the reference period exceeds the provision for claims outstanding at the beginning of the reference period, a firm must add the amount of the excess to the amount of claims paid in the reference period; or
2. (2) the beginning of the reference period exceeds the provision for claims outstanding at the end of the reference period, a firm must deduct the amount of the excess from the amount of claims paid in the reference period,

where for the purposes of this Chapter, the definitions of amount of claims paid and provision for claims outstanding must be read so as to refer to a reference period rather than a financial year.

8.4

A firm must divide the aggregate obtained under 8.3(1) or (2) by the number of months in the reference period and multiply by twelve.

8.5

A firm must calculate 26% of the amount arrived at under 8.4.

8.6

In the case of general insurance business consisting of health insurance based on actuarial principles, 8.5 applies with the substitution of 8.66% for 26% if the conditions in 7.5(1) to (5) are satisfied.

8.7

Where 8.6 applies to a firm whose general insurance business consists partly of health insurance based on actuarial principles and partly of other business, 8.2 to 8.6 must operate separately for each part of the general insurance business, so as to produce a sum under 8.6 for the health insurance and a sum under 8.5 for the other business.

8.8

A firm must multiply the sum arrived at under 8.6 or 8.7, or the aggregate of the sums arrived at under 8.6 and 8.7, by the same percentage as is applicable for the purposes of 7.10.