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Regulation 32 Assets to be taken into account only to a specified extent

Changes not yet applied. Later legislation changes this provision in ways not yet written into the text below:

(1)

The extent to which assets of a society shall be taken into account shall be determined on the basis of the society’s aggregate exposure to such assets.

(2)

Where the aggregate exposure of the society to assets of any one description exceeds the maximum admissible value for assets of that description, there shall be left out of account assets equal in value to the excess comprising—

(a)

assets of that description; and

(b)

where there are insufficient assets of that description held, any other assets.

(3)

In this regulation, “aggregate exposure” means the value of such assets held by the society (if any) adjusted—

(a)

to take account of the value of assets of that description which the society is deemed to have acquired or disposed of by the application of paragraphs (6) to (8) below; and

(b)

to include the value of assets of that description which have been transferred to another party by the society under a stock lending transaction.

(4)

In this regulation, the “maximum admissible value” means—

(a)

for a society carrying on general business, whether or not also carrying on long term business, in the case of general business assets of a description specified in Part I of Schedule 5, an amount equal to the percentage of the general business amount specified in Schedule 5 for assets of that description;

(b)

for a society carrying on only long term business, for all assets of a description specified in Part I of Schedule 5, an amount equal to the percentage of the long term business amount specified in Schedule 5 for assets of that description;

(c)

for a society carrying on general business and long term business, in the case of long term business assets of a description specified in Part I of Schedule 5, an amount equal to the percentage of the long term business amount specified in Schedule 5 for assets of that description;

(d)

for any society, in the case of assets of any other description, no value.

(5)

For the purposes of determining whether, in pursuance of paragraphs 6, 8, 9, 10, 12, 13 and 14 of Schedule 5, assets should be left out of account by reason that the aggregate exposure exceeds the maximum admissible value, account may be taken of any amount which has already been left out of account in respect of assets of any of the descriptions in those paragraphs.

(6)

Where the society is a part to a contract which is (wholly or in part) a futures contract which—

(a)

provides for the acquisition of assets by the society; or

(b)

is listed and provides for the disposal of assets by the society; or

(c)

is not listed but provides for the disposal of assets by the society to an approved counterparty within one year of the relevant date,

for the purposes of calculating its aggregate exposure the society shall be deemed at the relevant date to have acquired or disposed of such assets.

(7)

Where the society is a party to a contract which is (wholly or in part) an option which—

(a)

provides for the acquisition of assets by the society; or

(b)

is listed and provides for the disposal of assets by the society; or

(c)

is not listed but provides for the disposal of assets by the society to an approved counterparty within one year of the relevant date,

and it is prudent at the relevant date to assume that such option will be exercised, for the purposes of calculating its aggregate exposure to such assets, the society shall be deemed to have acquired or disposed of such assets at that date.

(8)

Where the society is a party to a contract which (wholly or in part) is or has the equivalent effect to a contract for differences, the value of which depends to a significant extent upon fluctuations in the value of, or income from, particular assets, for the purposes of calculating its aggregate exposure the society shall be deemed to have achieved the effect of such contract for differences by entering into appropriate options or futures contracts in respect of those assets, and such options or futures contracts shall be dealt with in accordance with paragraphs (6) and (7) above.

(9)

In this regulation—

  • “general business amount” means the aggregate of the society’s general business liabilities and in the case of a society which carries on general business an amount equal to whichever is the greater of 225,000 ECU or 20 per cent. of the general premium income less the amount of the deduction specified in paragraph (10) below.

  • “long term business amount” means the aggregate of the society’s long term business liabilities and whichever is the greater of—

    1. (a)

      one-sixth of the margin of solvency which the society is required to maintain and

    2. (b)

      600,000 ECU

    less the amount of the deduction specified in paragraph (10) below;

(10)

The deduction to be made in determining the general business amount or the long term business amount in accordance with paragraph (9) above shall be the aggregate of the following—

(a)

the amount of any general business or, as the case may be, long term business liabilities of the society to a dependant, other than insurance liabilities; and

(b)

the value of the debts due or to become due to and other rights of the society under contracts of reinsurance ceded by it (but excluding any rights of recovery in respect of insurance liabilities already discharged by the society) which are general business or, as the case may be, long term business assets of the society; and

(c)

in the case of the long term business amount, the amount of any liabilities of the society in respect of property linked benefits.

(11)

Where an asset (or group of assets) of a society carrying on only long term business is attributed by the society partly to its long term business assets and partly to its other assets, any asset or assets required to be left out of account shall be left out of account in the same proportion as such attribution.

(12)

For the purposes of this regulation, the amount of the liabilities of a society shall be determined in accordance with Part V of these Regulations.

(13)

Until 1st January 1995, paragraphs 12 and 14 of Schedule 5 shall have effect as if the words “any of its connected companies (not being a dependant of the society)” were omitted.

(14)

Where a society has entered into any contracts providing for the payment of index linked benefits, this regulation shall not apply to assets of any of the descriptions specified in paragraphs 1 to 11 and 15 to 17 of Schedule 5 to the extent that they are held in compliance with section 49A of the 1992 Act to match liabilities in respect of such benefits.

(15)

This regulation shall not apply to—

(a)

any approved securities or to any interest accrued thereon; or

(b)

debts of the descriptions specified in regulation 23(5); or

(c)

debts in respect of premiums; or

(d)

moneys due from the Crown or any public body;

(16)

This regulation shall not apply to a registered friendly society to which neither section 37(2) nor (3) of the 1992 Act applies.