{
  "url": "https://openlegislation.uk/insurance-and-reinsurance-undertakings-prudential-requirements-regulations-2023/regulation-7B",
  "json_url": "https://openlegislation.uk/insurance-and-reinsurance-undertakings-prudential-requirements-regulations-2023/regulation-7B.json",
  "legislation": "uksi/2023/1347",
  "legislation_title": "The Insurance and Reinsurance Undertakings (Prudential Requirements) Regulations 2023",
  "legislation_url": "https://openlegislation.uk/insurance-and-reinsurance-undertakings-prudential-requirements-regulations-2023",
  "path": "regulation/7B",
  "kind": "regulation",
  "number": "7B",
  "heading": "Calculation of risk margin",
  "text": "Where PRA rules provide for a risk margin to be calculated separately from the best estimate, the risk margin for the whole portfolio of insurance and reinsurance obligations of an insurance or reinsurance undertaking must be calculated in accordance with the following formula—\nRM=CoC×∑t≥0SCRt×maxλt,λfloor1±rt±1t±1 ;\nwhere—\n(a) “RM” denotes risk margin;\n(b) “CoC” denotes the cost-of-capital rate, which equals 4%;\n(c) the sum covers all integers including zero;\n(d) “SCR(t)” denotes the SCR of the reference undertaking after t years, calculated in accordance with PRA rules;\n(e) “λ” denotes the risk tapering factor, and equals—\n(i) 0.9 for long-term insurance and reinsurance obligations, and\n(ii) 1.0 for general insurance and reinsurance obligations;\n(f) “λt” denotes the risk tapering factor to the power of t years;\n(g) “λfloor” denotes the floor of the risk tapering factor, and equals 0.25;\n(h) “r(t+1)” denotes the basic relevant risk-free interest rate for the maturity of t + 1 years, derived from the basic relevant risk-free interest rate term structure.",
  "extent": null,
  "status": null,
  "version": "current",
  "annotations": [
    {
      "type": "F",
      "label": "F1",
      "text": "Pt. 2 Ch. 2 inserted (1.11.2024 for specified purposes and 31.12.20204 otherwise) by The Insurance and Reinsurance Undertakings (Prudential Requirements) (Amendment and Miscellaneous Provisions) Regulations 2024 (S.I. 2024/1083), regs. 1(2), 2(5)"
    }
  ],
  "outstanding_effects": [],
  "provenance": {
    "source": "legislation.gov.uk",
    "source_url": "https://www.legislation.gov.uk/uksi/2023/1347/regulation/7B",
    "retrieved_at": "2026-10-28T21:37:18.306343+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."
}