Prudential Regulation Authority Rulebook

11.1

1. (1) Firms must calculate amounts recoverable from reinsurance contracts and UK ISPVs in accordance with 2 to 10.
2. (2) For the purposes of (1), firms must take into account the time difference between amounts becoming recoverable and the actual receipt of those amounts.
3. (3) Firms must adjust the calculation referred to in (1) to take into account expected losses due to the default of the counterparty. That adjustment must be based on an assessment of the probability of default of the counterparty and the average loss that would result from that default (loss-given- default).

[Note: Art. 81 of the Solvency II Directive]