Prudential Regulation Authority Rulebook

1.1

Unless otherwise stated, this Part applies to:

1. (1) a UK Solvency II firm;
2. (2) in accordance with Insurance General Application 3, the Society, as modified by 16; and
3. (3) in accordance with Insurance General Application 3, managing agents, as modified by 16.

1.2

In this Part, the following definition shall apply:

basic relevant risk-free interest rate term structure

means the relevant risk-free interest rate term structure without:

1. (1) a matching adjustment;
2. (2) a volatility adjustment; or
3. (3) a risk-free interest rate transitional measure.

cost-of-capital rate

means the rate (above the relevant risk-free interest rate) that must be used in the determination of the cost that a UK Solvency II firm would incur in order to hold an amount of eligible own funds equal to the SCR necessary to support the insurance and reinsurance obligations over their lifetime, as specified in the Solvency II Regulations.

relevant portfolio of assets

means the assigned portfolio of assets, consisting of bonds and other assets with similar cash-flow characteristics, to cover the best estimate of the relevant portfolio of insurance or reinsurance obligations, referred to in regulation 42(4)(a) and (b) of the Solvency 2 Regulations 2015.

volatility adjustment approval

means the approval granted to a firm by the PRA to permit it to apply a volatility adjustment for the purposes of calculating the best estimate.