Prudential Regulation Authority Rulebook

8.1

A firm must notify the PRA immediately, in accordance with Notifications 7, as soon as it first becomes aware:

1. (1) that a reinsurance exposure to a reinsurer or group of closely related reinsurers is reasonably likely to exceed the limit of 100% of its capital resources; or
2. (2) if (1) does not apply, that it has exceeded the limit referred to in (1).

8.2

Upon notification under 8.1, a firm must:

(1) demonstrate that prudent provision has been made for the reinsurance exposure in excess of the 100% limit, or explain why in the opinion of the firm no provision is required; and

(2) explain how the reinsurance exposure is being safely managed.

8.3

If a firm elects under 9.3 to make a deduction in respect of collateral, the firm must deduct from the amount of loss determined in accordance with 5.1(2) so much of the value of that collateral as:

1. (1) would be realised by the firm were it to exercise its rights in relation to the collateral; and
2. (2) does not exceed any of the relevant limits in 7.4(3).

8.4

A firm must, in determining its reinsurance exposures for the purposes of this Part, aggregate any reinsurance exposure where the identity of the reinsurer is not known by the firm with the highest reinsurance exposure where it does know the identity of the reinsurer.

8.5

A firm must notify the PRA immediately in accordance with Notifications 7 if the gross earned premiums which it pays to a reinsurer or group of closely related reinsurers has exceeded, or is anticipated to exceed, the higher of:

1. (1) 20% of the firm's projected gross earned premiums for that financial year; or
2. (2) £4 million.

8.6

Upon notification under 8.5, a firm must explain to the PRA how, despite exceeding the limits in 8.5, the credit risk is being safely managed.