Paragraph 3 Restriction on policyholder surrender rightsF1

Where this Schedule applies in relation to an insurer, the total value of a policyholder’s rights under a relevant contract of insurance which the policyholder may surrender in a relevant period must not exceed the surrender limit for that period.

For these purposes—

• “relevant contract of insurance” means a contract of long-term insurance which is not a contract in respect of which the following conditions are met—

  1. (a)

     the benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or infirmity;

  2. (b)

     the contract has no surrender value, or the consideration consists of a single premium and the surrender value does not exceed that premium;

  3. (c)

     the contract makes no provision for its conversion or extension in a manner which would result in it ceasing to comply with either of the above conditions;

• “relevant period” means—

  1. (a)

     the period of 12 months beginning with the date on which the insurer entered into financial difficulties, and

  2. (b)

     each subsequent period of 12 months;

• “surrender limit”, in relation to a relevant contract of insurance and relevant period, is an amount equal to 5% of the total surrender value of the contract on the day on which the relevant period began.