Prudential Regulation Authority Rulebook

5.1

A pure reinsurer must invest its assets in accordance with the following requirements:

1. (1) the assets must take account of the type of business carried out by the firm, in particular the nature, amount and duration of expected claims payments, in such a way as to secure the sufficiency, liquidity, security, quality, profitability and matching of its investments;
2. (2) the firm must ensure that the assets are diversified and adequately spread and allow the firm to respond adequately to changing economic circumstances, in particular developments in the financial markets and real estate markets or major catastrophic events; the firm must assess the impact of irregular market circumstances on its assets and must diversify the assets in such a way as to reduce such impact;
3. (3) investment in assets which are not admitted to trading on a regulated market must be kept to prudent levels;
4. (4) investment in derivatives and quasi-derivatives must contribute to a reduction of investment risks or facilitate efficient portfolio management and such investments must be valued on a prudent basis, taking into account the underlying assets, and included in the valuation of the firm's assets;
5. (5) the firm must avoid excessive risk exposure to a single counterparty and to other derivative or quasi-derivative operations;
6. (6) the assets must be properly diversified in such a way as to avoid:
1. (a) excessive reliance on any one particular asset, issuer or group of undertakings; and
2. (b) accumulations of risk in the portfolio as a whole;
7. (7) investments in assets issued by the same issuer or by issuers belonging to the same group must not expose the firm to excessive risk concentration; and
8. (8) (6) and (7) do not apply to investment in government bonds.