{
  "url": "https://openlegislation.uk/friendly-societies-insurance-business-no-2-regulations-1993/note",
  "json_url": "https://openlegislation.uk/friendly-societies-insurance-business-no-2-regulations-1993/note.json",
  "legislation": "uksi/1993/2520",
  "legislation_title": "The Friendly Societies (Insurance Business No. 2) Regulations 1993",
  "legislation_url": "https://openlegislation.uk/friendly-societies-insurance-business-no-2-regulations-1993",
  "path": "note",
  "kind": "note",
  "number": null,
  "heading": "Explanatory note",
  "text": "(This note is not part of the Regulations)\nThese Regulations revoke–\n(a) the Friendly Societies (Insurance Business) Regulations 1993 (S.I. 1993/98) which applied to incorporated friendly societies, and\n(a) the Friendly Societies (Long Term Insurance Business) Regulations 1987 (S.I. 1987/2132) which applied to certain registered friendly societies carrying on long term business,\nand re-enact those provisions with minor modifications so as to apply to both incorporated friendly societies and registered friendly societies which carry on insurance business. The Regulations come into force on 1st January 1994.\nThese Regulations implement the relevant provisions of (a) the First Life Directive (that is, Council Directive 79/267/EEC on the co–ordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance (O.J. No. L63, 13.3.79, p.1)); (b) the First Non–Life Directive (that is, Council Directive 73/239/EEC on the co–ordination of laws, regulations and administra– tive provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance (O.J. No. L228, 16.8.73, p.3)); and (c) the Second Non–Life Directive (that is, Council Directive 88/357/EEC on the co–ordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/EEC (O.J. No. L172, 4.7.88, p.1)).\nThe Regulations are divided into seven Parts: Part I contains the usual preliminary provisions as to citation and interpretation; Part II deals with margins of solvency; Part III deals with matching and localisation; Parts IV and V set out the rules to be applied in valuing assets and determining liabilities; Part VI makes special provision for linked long term contracts; and Part VII contains final provisions of a miscellaneous nature.\nPart I is largely self–explanatory. Regulation 1 provides that the Regulations come into force on 1st January 1994.\nIn Part II, regulation 4 deals with the margins of solvency to be maintained by friendly societies. Regulation 4 is made under section 48 of the Friendly Societies Act 1992 (“the 1992 Act”), which provides for the amount of the margin to be prescribed by regulations. The margin for the various classes of long term business is to be determined in accordance with the detailed rules in Schedule 1. The margin for general business is the higher of the results given by the methods of calculation set out in Schedules 2 and 3 respectively. Regulation 5, which is made under section 49 of the 1992 Act, sets out the minimum level of the margin of solvency. Regulation 5 refers to that level as the “guarantee fund” which is defined as one–third of the required margin of solvency subject, in the case of a registered friendly society to which section 37(2) or (3) of the 1992 Act applies or an incorporated friendly society, to a minimum amount referred to as the “minimum guarantee fund”. The minimum guarantee fund is arrived at in accordance with regulation 6 with respect to long term business and regulation 7 for general business. The guarantee fund therefore cannot be quantified until the required margin of solvency has been calculated. If the margin of solvency falls below the guarantee fund, the Commission may request the society concerned to submit a short– term financial scheme to restore the position (section 49 of the 1992 Act). Regulation 5(3) limits the extent to which implicit items may be taken into account in the composition of the guarantee fund and minimum guarantee fund for long term business. Implicit items are future surpluses, zillmerising and hidden reserves, as provided in regulations 8—11 which are valuation regulations made under section 45 of the 1992 Act. The minimum guarantee fund is expressed as an amount in ECU. The term “ECU” is defined in section 119(2) of the 1992 Act which states that the exchange rates as between the ECU and pounds sterling to be applied for each year beginning on 31st December shall be the rates applicable on the last day of the preceding October for which exchange rates for the currencies of all the member States were published in the Official Journal of the Communities. Information on the appropriate exchange rate is available from the Friendly Societies Commission.\nRegulations 12 to 18 in Part III are necessary to implement the above mentioned directives as regards matching and localisation. Matching means holding assets in a currency appropriate to the society’s liabilities, and localisation means holding those assets in the country appropriate to them. Regulations 12 to 18 apply only to friendly societies to which section 37(2) or (3) of the 1992 Act applies.\nParts IV and V are valuation regulations made under section 45 of the 1992 Act. They are essentially adaptations of Parts V and VI of the Insurance Companies Regulations 1981. Part IV is intended to ensure a satisfactory spread of assets by requiring that any asset, the valuation of which is not provided for in the Regulations, is to be left out of account altogether. Furthermore, assets of a description specified in Schedule 5 (other than the assets of a registered friendly society to which neither section 37(2) nor (3) of the 1992 Act applies) may be taken into account only within the limits specified in that Schedule. Regulations 21 and 22 make provision for valuation of shares in and debts due from dependants of societies. Dependants are defined as subsidiaries of, or bodies jointly controlled by, a friendly society within the meaning of section 13 of the 1992 Act. Consequently no registered friendly society is capable of having a dependant for the purposes of these Regulations. Part V contains, in regulation 38, provision for valuation of future premiums by the net premium method, subject to the exclusion of certain types of sickness insurance carried on by Holloway and other societies, to which the net premium method is not appropriate.\nIn Part VI, regulation 47 makes provision for all long term linked contracts entered into by friendly societies (including those entered into prior to the coming into force of these Regulations) other than contracts expressly excluded by regulation 47(4) and is made under section 56 of the 1992 Act.\nPart VII contains miscellaneous provisions. Regulation 48 (in conjunction with section 46(1)(a) of the 1992 Act) ensures that any society which carries on long term business and is–\n(a) an incorporated friendly society, or\n(b) a registered friendly society to which section 37(2) of the 1992 Act applies, is required to carry out an annual actuarial investigation into its financial condition. Regulation 49 prescribes the persons required to sign one copy of the abstract of the actuary’s report for the purposes of section 46(3) of the 1992 Act. Regulation 50 contains a transitional measure designed to ensure that an authorised registered friendly society (other than a society to which section 37(2) or (3) of the 1992 Act applies) is not under a duty to maintain a solvency margin under section 48 of that Act until the “first investigation return date” which is defined in regulation 50(2).\nA review of the cost of compliance with these Regulations has been undertaken and the resulting compliance cost assessment may be purchased from the Secretary, Friendly Societies Commission, 15 Great Marlborough Street, London W1V 2AX.",
  "extent": null,
  "status": null,
  "version": "current",
  "annotations": [],
  "outstanding_effects": [],
  "provenance": {
    "source": "legislation.gov.uk",
    "source_url": "https://www.legislation.gov.uk/uksi/1993/2520/note",
    "retrieved_at": "2026-10-29T13:49:41.320266+00:00"
  },
  "licence": "Open Government Licence v3.0",
  "licence_url": "https://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/",
  "attribution": "Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives."
}