Paragraph 2 Long term classes III and VII
For long term business of class III or VII the required margin of solvency shall be determined in accordance with subparagraphs (2) to (5) below.
In so far as a society bears an investment risk, the first calculation shall be applied.
In so far as—
a society bears no investment risk; and
the total expired and unexpired term of the relevant contract exceeds five years; and
the allocation to cover management expenses in the relevant contract has a fixed upper limit which is effective as a limit for a period exceeding five years,
the first calculation shall be applied, but as if paragraph 1(2)(a) above contained a reference to 1 per cent. instead of 4 per cent.
If neither subparagraph (2) nor subparagraph (3) above applies, then, subject to subparagraph (5) below, the required margin of solvency is zero.
Where a society covers a death risk, a sum arrived at by applying the second calculation disregarding paragraph 1(4) and (5) shall be added to any required margin of solvency, including a required margin of solvency of zero, arrived at under subparagraph (2), (3) or (4) above.