# The Insurance Companies (Amendment) Regulations 1995, Regulation 5: Assets sold to or purchased from an approved credit institution or an approved investment firm subject to an agreement for resale or repurchase


After regulation 47 of the 1994 Regulations, insert—
“Assets sold to or purchased from an approved credit institution or an approved investment firm subject to an agreement for resale or repurchase.
47A (1) Where an insurance company has sold securities to or purchased securities from an approved credit institution or an approved investment firm and such sale or purchase was made subject to an agreement that the approved credit institution or approved investment firm would, either on demand by the insurance company or within six months of such sale or purchase, subsequently sell to or purchase from the insurance company equivalent securities, then if at the relevant date such subsequent sale or purchase has not taken place and the conditions specified in paragraphs (2) and either (3) or (4) below as appropriate are satisfied, the insurance company—
(a) shall value—
(i) securities sold by it under such agreement as if such securities had been retained by it; and
(ii) assets provided by it as consideration for the purchase of securities under such agreement as if such consideration had not been provided by it; and
(b) not ascribe a value to—
(i) any consideration received for the sale of securities under such agreement (or any assets purchased by it with such consideration) up to the limit of the value of the securities sold; or
(ii) any securities purchased by it under such agreement (or any assets purchased with the proceeds of the sale of any such securities) up to the limit of the consideration (valued in accordance with generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate to insurance companies) provided by it.
(2) The condition specified in this paragraph is that where at any time after the sale or purchase of securities by the insurance company under an agreement described in paragraph (1) above either—
(a) the amount of the consideration received by the insurance company for the sale of the securities fell below the value of the securities sold by it; or
(b) the value of the securities purchased by the insurance company fell below the value of the consideration provided by it
by more than 2½ per cent. of the value of the securities sold or purchased, as the case may be, then the insurance company demanded additional consideration whose amount was equal to the shortfall and such demand was complied with before the end of the working day next following the day on which such shortfall occurred.
(3) The conditions specified in this paragraph are that if the insurance company purchases securities from an approved credit institution or an approved investment firm and the consideration provided by the insurance company is other than by way of sale of securities—
(a) the securities purchased are—
(i) approved securities;
(ii) listed securities; or
(iii) securities issued by an approved credit institution; and
(b) the securities purchased do not include—
(i) listed securities issued by the same counterparty whose aggregate value amounts to more than 15 per cent of the value of the securities purchased; or
(ii) in the event that the condition in sub-paragraph (b)(i) above is not satisfied, securities whose value when aggregated with the insurance company’s existing exposure to assets of the same description or to the same counterparty would cause the company to exceed the appropriate permitted asset exposure limit or permitted counterparty exposure limit as determined in accordance with regulation 57 of, and Schedule 12 to, these Regulations.
(4) The conditions specified in this paragraph are that if the insurance company sells securities to an approved credit institution or an approved investment firm—
(a) the consideration provided by the approved credit institution or approved investment firm is—
(i) cash;
(ii) approved securities;
(iii) listed securities;
(iv) securities issued by an approved credit institution;
(v) a Talisman short term certificate;
(vi) a charge over assets set out in sub-paragraphs (i) to (iv) above;
(vii) a letter of credit established with an approved credit institution; or
(viii) a guarantee provided by an approved credit institution; and
(b) the consideration does not include—
(i) except to the extent that the condition in sub-paragraph (b)(ii) below is satisfied, consideration whose amount when aggregated with the insurance company’s existing exposure to assets of the appropriate description or to the relevant counterparty would cause the company to exceed the appropriate permitted asset exposure limit or permitted counterparty exposure limit as determined in accordance with regulation 57 of, and Schedule 12 to, these Regulations; or
(ii) consideration, more than 15 per cent. of the aggregate amount of which takes the form of securities (other than approved securities) issued by, letters of credit established with, guarantees provided by, cash deposited with, a charge over cash deposited with or a charge over securities issued by, the same counterparty; and—
(c) the consideration to be provided by the insurance company for the subsequent purchase of equivalent securities is—
(i) where the consideration for the original purchase by the approved credit institution or approved investment firm was (wholly or in part) cash, cash denominated in the same currency, and
(ii) where the consideration was (wholly or in part) securities, securities equivalent to the securities provided by way of consideration.
(5) For the purposes of paragraph (4) above, the amount of any consideration shall be—
(a) where the consideration provided is a letter of credit established with an approved credit institution, the lower of the amount made available under the letter of credit and the value of the assets sold;
(b) where the consideration is a guarantee provided by an approved credit institution, the lower of the amount of the guarantee and the value of the assets sold;
(c) where the consideration takes the form of assets of the types mentioned in paragraph (4)(a)(i) to (iv) above, or a charge over such assets, the value of the assets as determined in accordance with this Part of these Regulations; or
(d) where the consideration takes the form of a Talisman short term certificate, the value of the securities represented by that certificate.
(6) Where an insurance company has entered into a number of agreements described in paragraph (1) above, for the purposes of paragraphs (3) and (4) of this regulation—
(a) any or all agreements under which the subsequent sale or purchase has not taken place at the relevant date may be treated as one agreement; and
(b) in such case, the 15 per cent. limits in paragraphs (3)(b)(i) above and (4)(b)(ii) above shall be calculated by reference to the aggregate of the value of the securities purchased under paragraph (3) above and the amount of any consideration under paragraph (4) above.”

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Source: https://www.legislation.gov.uk/uksi/1995/3248/regulation/5 (the official version)
Page: https://openlegislation.uk/insurance-companies-amendment-regulations-1995/regulation-5
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.