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The Friendly Societies (Insurance Business) Regulations 1994

Type Statutory-Instrument

Publication 1994-07-20

State In force

Department Queen's Printer of Acts of Parliament

Source legislation.gov.uk

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

(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.

PART V — DETERMINATION OF LIABILITIES

Interpretation: Part V

33

In this Part of these Regulations—

“derivative contract” has the meaning given in regulation 19(1) of these Regulations;

“general business liabilities” means liabilities of a society arising under or in connection with contracts for general business;

“long term liabilities” means liabilities of a society arising under or in connection with contracts for long term business including liabilities arising from deposit back arrangements;

“the valuation date”, in relation to an actuarial investigation, means the date to which the investigation relates.

Application: Part V

34

This Part of these Regulations applies with respect to the determination of the amount of liabilities of a society for the purposes of—

(a) section 48 of the 1992 Act;

(b) any actuarial investigation to which section 46 or 47 of the 1992 Act applies; and

(c) such other actuarial investigation in relation to the financial condition of an authorised society which carries on insurance business as may be required by the Commission in the exercise of its powers under Part V of the 1992 Act.

Long term and general business

35

(1) Subject to this Part of these Regulations, the amount of liabilities of a society in respect of long term and general business and other lawful activities shall be determined in accordance with generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate for insurance business.

(2) In determining under paragraph (1) above the amount of liabilities of a society, all contingent and prospective liabilities shall be taken into account.

Provision for adverse changes

36

(1) A society which has or may have (following the exercise of any right by a third party) an obligation under a derivative contract or a contract to which regulation 23(8) applies shall make such provision as shall be sufficient, on prudent assumptions, to allow for the effect of possible adverse changes in—

(a) the current value of the assets or indices of assets to which that contract relates; and

(b) the current value of any assets held by the society,

on the ability of the society to meet its obligations under that contract.

(2) For the purposes of paragraph (1) above, a society shall have regard to—

(a) past volatility in the value of such assets or indices of assets (and in the value of assets or indices of a similar nature); and

(b) the possibility of adverse changes in the volatility of the value of such assets or indices in the future.

General business liabilities

37

The amount of the general business liabilities shall be determined in compliance with the rules applicable to such liabilities laid down in Part VI of Schedule 6 to the Friendly Societies (Accounts and Related Provisions) Regulations 1994[^f00019].

Long term liabilities

38

(1) The determination of the amount of long term liabilities (other than liabilities which have fallen due for payment before the valuation date) shall be made on actuarial principles which shall have due regard to the reasonable expectations of policyholders and shall make proper provision for all liabilities on prudent assumptions that shall include appropriate margins for adverse deviation of the relevant factors.

(2) The determination shall take account of all prospective liabilities as determined by the policy conditions for each existing contract, taking credit for premiums payable after the valuation date.

(3) Without prejudice to the generality of paragraph (1) above, the amount of the long term liabilities shall be determined in compliance with each of regulations 39 to 49 below and shall take account, inter alia, the following factors:

(a) all guaranteed benefits, including guaranteed surrender values;

(b) vested, declared or allotted bonuses to which policyholders are already either collectively or individually contractually entitled;

(d) expenses, including commissions.

Method of calculation

39

(1) Subject to paragraphs (2), (3) and (4) below, the amount of the long term liabilities shall be determined separately for each contract by a prospective calculation.

(2) A retrospective calculation may be applied to determine the liabilities where a prospective method cannot be applied to a particular type of contract or benefit, or where it can be demonstrated that the resulting amount of liabilities would be no lower than would be required by a prudent prospective calculation.

(3) Appropriate approximations or generalisations may be made where they are likely to provide the same, or a higher, result than individual calculations of the same amount of the liabilities in respect of each contract.

(4) Where necessary, additional amounts shall be set aside on an aggregated basis for general risks which are not individualised.

(5) The method of calculation of the amount of the liabilities and the assumptions used shall not be subject to discontinuities from year to year arising from arbitrary changes and shall be such as to recognise the distribution of profits in an appropriate way over the duration of each policy.

(6) The liabilities for contracts under which the policyholder is eligible to participate in any established surplus shall have regard to the level of the premiums under the contracts, to the assets held in respect of those liabilities, and to the custom and practice of the society in the manner and timing of the distribution of profits or the granting of discretionary additions, as the case may be.

(7) In this regulation “established surplus” means an excess of assets representing the whole or a particular part of the fund or funds maintained by the society in respect of its long term business over the liabilities, or a particular part of the liabilities, of the society attributable to that business as shown by an investigation to which section 46 or 47 of the 1992 Act applies.

Avoidance of future valuation strain

40

The amount of the liability determined in respect of a group of contracts shall not be less than such amount as, if the assumptions adopted for the valuation were to remain unaltered and were fulfilled in practice, would enable liabilities similarly determined at all times in the future to be covered from resources arising solely from the contracts and the assets covering the amount of the liability determined at the current valuation.

Valuation of future premiums

41

(1) Where further specified premiums are payable by the policyholder under a contract (not being a linked long term contract) under which benefits (other than benefits arising from a distribution of surplus) are determined from the outset in relation to the total premiums payable thereunder, then, subject to paragraph (4) and regulation 42 below—

(a) where the premiums under the contract are at a uniform rate throughout the period for which they are payable, the premiums to be valued shall not be greater than such level premiums as, if payable for the same period as the actual premiums under the contract and calculated according to the rates of interest and rates of mortality or disability which are to be employed in calculating the liability under the contract, would have been sufficient at the outset to provide for the benefits under the contract according to the contingencies upon which they are payable, exclusive of any additions for profits, expenses or other charges;

(b) where the premiums under the contract are not at a uniform rate throughout the period for which they are payable, the premiums to be valued shall not be greater than such premiums as would be determined on the principles set out in subparagraph (a) above modified as appropriate to take account of the variations in the premiums payable by the policyholder in each year;

save that a premium to be valued shall in no year be greater than the amount of the premium payable by the policyholder.

(2) Where the terms of the contract have changed since the contract was first made (the terms of the contract being taken to change for the purposes of this paragraph if the change is indicated in an endorsement on the policy but not if a new policy is issued), then, for the purposes of paragraph (1) above it shall be assumed that those changes from the time they occurred were provided for in the contract at the time it was made.

(3) Where under a contract (not being a linked long term contract)—

(a) each premium paid increases the benefits (other than benefits arising from a distribution of surplus) provided under the contract; or

(b) the amount of a premium payable in future is not determinable until it comes to be paid,

future premiums and the corresponding liability may be left out of account so long as adequate provision is made against any risk that the increase in the liabilities of the society resulting from the payment of future premiums might exceed the amount of the premiums.

(4) An alternative valuation method to that described in paragraphs (1) to (3) above may be used where it can be demonstrated that the alternative method results in reserves no less, in aggregate, that would result from use of the method described in those paragraphs.

Acquisition expenses

42

(1) In order to take account of acquisition expenses, the maximum annual premium to be valued under regulation 41 above may (subject to paragraph (2) below) be increased by an amount not greater than the equivalent, taken over the whole period of premium payments and calculated according to the rates of interest and rates of mortality or disability employed in valuing the contract, of 3.5 per cent. (or the defined percentage, if it is lower than 3.5 per cent.) of the relevant capital sum under the contract.

(2) For the purposes of paragraph (1) above “the defined percentage” is the percentage arrived at by taking (for all contracts of the same type as the contract in question for which an adjustment is made) the average of the percentages of the relevant capital sum under each such contract that represent the acquisition costs incurred which, after allowing for the effects of taxation, might reasonably be recovered from the premiums payable under the contract.

(3) The increase permitted by the paragraph (1) above shall be subject to the limitation that the amount of a future premium valued shall not in any event be greater than the amount of the premium actually payable by the policyholder.

(4) For the purposes of this regulation—

(a) for contracts other than temporary assurances, the relevant capital sum under a contract shall be arrived at in accordance with regulation 10(4) above; and

(b) for temporary assurances, the relevant capital sum shall be the sum assured on the valuation date.

Rates of interest

43

(1) The rates of interest to be used in calculating the present value of future payments by or to a society shall be no greater than the rates of interest determined from a prudent assessment of the yields on existing assets attributed to the long term business and, to the extent appropriate, the yields which it is expected will be obtained on sums to be invested in the future.

(2) For the purposes of paragraph (1) above, the assumed yield on an asset attributed to the long term business, before any adjustment to take account of the effect of taxation, shall not exceed the yield on that asset calculated in accordance with paragraphs (3) to (7) below, reduced by 2.5 per cent. of that yield.

(3) For the purpose of calculating the yield on an asset—

(a) the asset shall be valued in accordance with Part IV of these Regulations, excluding any provision under which assets may be taken at lower book values for the purposes of an investigation to which section 46 or 47 of the 1992 Act applies; and

(b) where a particular asset is required to be taken into account only to a specified extent by the operation of regulation 32 above, the future income to be taken into account (whether interest, dividends or repayments of capital) shall be correspondingly reduced.

(4) For fixed interest investments (that is to say, investments which are fixed interest securities as defined in regulation 19(1) above) the yield on an asset, subject to paragraph (7) below, shall be that annual rate of interest which, if used to calculate the present value of future payments of interest before the deduction of tax and the present value of repayments of capital, would result in the sum of those amounts being equal to the value of the asset.

(5) For variable interest investments (that is to say, investments which are not fixed interest securities as defined in regulation 19(1) above) that are equity shares or land, the yield on an asset, subject to paragraph (7) below, shall be the ratio to the value of the asset of the income before deduction of tax which would be received in the period of twelve months following the valuation date on the assumption that the asset will be held throughout that period and that the factors which affect income will remain unchanged, so however that account shall be taken of any changes in those factors known to have occurred by the valuation date and in particular, without prejudice to the generality of the foregoing, of—

(a) any known changes in the rental income from property or in dividends on equity shares;

(b) any forecast changes in dividends which have been publicly announced by the valuation date;

(d) the value (at the most recent date for which it is known at the valuation date) of any determinant of the amount of any future interest payment, the said value being deemed to remain unaltered for all subsequent dates.

(6) For variable interest investments (that is to say, investments which are not fixed interest securities as defined in regulation 19(1) above) other than equity shares or land, the yield on an asset, subject to paragraph (7) below, shall be that annual rate of interest which, if used to calculate the present value of future payments of interest, before deduction of tax, and the present value of repayments of capital, where applicable, would result in the sum of these amounts being equal to the value of the asset, on the assumption that—

(a) the value of any determinant of the amount of the next interest rate payment and capital repayment made during the following twelve months will be the value of that determinant at the most recent date for which it is known at the valuation date;

(b) the amount of future interest payments and capital repayments will take account, where appropriate, of—

(i) the right of either party to have the investment repaid; and

(ii) an assumed yield on other comparable investments made in the future not exceeding an amount determined in accordance with paragraphs (8) to (10) below; and

(c) indices and all other factors which affect future income payments or capital repayment will remain unchanged after the valuation date.

(7) In calculating the yield on an asset under this regulation—

(a) if the asset does not consist of equity shares or land—

(i) a prudent adjustment shall be made to exclude that part of the yield estimated to represent compensation for the risk that the income from the asset might not be maintained or that capital repayments might not be received as they fall due; and

(ii) in making that adjustment, regard shall be had wherever possible to the yields on risk-free investments of a similar term in the same currency;

(b) for assets which are equity shares or land, adjustments to yields shall be made as appropriate to exclude that part, if any, of the yield from each category of asset that is needed to compensation for the risk that the aggregate income from that category of asset, taking one year with another, might not be maintained; for the purposes of this subparagraph, a “category of asset” comprises assets of a similar nature, type and degree of risk.

(8) To the extent that it is necessary to make an assumption about the yields which will be obtained on sums to be invested in future, the yield shall be determined in accordance with paragraphs (9) and (10) below.

(9) Where the liabilities are denominated in sterling, the yield assumed, before any adjustments to take account of the effect of taxation—

(a) on any investment to be made more than three years after the valuation date, shall not exceed the lowest of—

(i) the long term gilt yield current on the valuation date; or

(ii) 6 per cent. per annum, increased by one quarter of the excess, if any, of the long term gilt yield current on the valuation date over 6 per cent. per annum; or

(iii) 7.5 per cent. per annum,

where “the long term gilt yield” means the annualised equivalent of the 15 year medium coupon yield for United Kingdom Government fixed-interest securities jointly compiled by the Financial Times, the Institute of Actuaries and the Faculty of Actuaries;

(b) on any investment to be made at any time not more than three years after the valuation date shall not exceed the assumed yield determined under paragraph (2) above adjusted linearly over the said three years to the yield determined in accordance with subparagraph (a) above.

(10) Where the liabilities are denominated in currencies other than sterling, the yield shall be determined on assumptions that are as prudent as those made under paragraph (9) above.

(11) In no case shall a rate of interest determined for the purposes of paragraph (1) above exceed the adjusted overall yield on assets calculated as the weighted average of the reduced yields on the individual assets arrived at under paragraph (2) above; and when that weighted average is calculated—

(a) the weight given to each investment shall be its value as an asset determined in accordance with Part IV of these Regulations, excluding any provision under which assets may be taken at lower book values for the purposes of any investigation to which section 46 or 47 of the 1992 Act applies; and

(b) except in relation to the rate of interest used in valuing payments of property linked benefits (as defined in regulation 19(1) above), both the yield and the value of any linked assets (as so defined) shall be omitted from the calculation.

(12) For the purpose of determining the rates of interest to be used in valuing a particular category of contracts the assets may, where appropriate, be notionally apportioned between different categories of contracts.

Rates of mortality and disability

44

The amount of the liability in respect of any category of contract shall, where relevant, be determined on the basis of prudent rates of mortality and disability and any other decrement that take into account—

(a) where the policyholder is an individual, the state in which he has his habitual residence; and

(b) where the policyholder is not an individual, the state in which the establishment of the policyholder to which the commitment covered by the contract relates is situated.

Expenses

45

(1) Provision for expenses, whether implicit or explicit, shall be not less than the amount required, on prudent assumptions, to meet the total net cost, after taking account of the effect of taxation, that would be likely to be incurred in fulfilling existing contracts if the society were to cease to transact new business twelve months after the valuation date.

(2) The provision mentioned in paragraph (1) above shall have regard to, among other things, the society’s actual expenses in the last twelve months before the valuation date and to the effects of inflation on future expenses on prudent assumptions as to the future rates of increase in prices and earnings.

Options

46

(1) Provision shall be made on prudent assumptions to cover any increase in liabilities caused by policyholders exercising options under their contracts.

(2) Where a contract includes an option whereby the policyholder could secure a guaranteed cash payment within twelve months following the valuation date, the provision for that option shall be such as to ensure that the value placed on the contract is not less than the amount required to provide for the payments that would have to be made if the option were exercised.

Contracts not to be treated as assets

47

No contract for long term business shall be treated as an asset.

No credit for profits from voluntary discontinuance

48

Allowance shall not be made in the valuation for the voluntary discontinuance of any contract if the amount of the liability so determined would thereby be reduced.

Nature and term of assets

49

The determination of the amount of long term liabilities shall take into account the nature and term of the assets representing those liabilities and the value placed upon them and shall include prudent provision against the effects of possible future changes in the value of the assets on—

(a) the ability of the society to meet its obligations arising under contracts for long term business as they arise; and

(b) the adequacy of the assets to meet the liabilities as determined in accordance with regulations 39 to 48 above.

PART VI — CONDUCT OF LONG TERM BUSINESS

Application: Part VI

50

This Part of these Regulations shall apply to a society which carries on long term business.

Linked long term contracts

51

(1) Benefits payable under any contract to which this regulation applies shall not be determined, either wholly or partly, by reference to the value of, or the income from, or fluctuations in the value of, property of any description other than property of any of the descriptions specified in Part I of Schedule 6 which, where appropriate, comply with the provisions of paragraph 16 of that Schedule.

(2) Benefits payable under any contract to which this regulation applies shall not be determined, whether directly or indirectly, either wholly or partly by reference to fluctuations in any index of the value of property other than an index described in Part II of Schedule 6.

(3) This regulation applies to ordinary long term contracts entered into by societies, including any such contracts entered into before the coming into force of these Regulations, which—

(a) are contracts under which the benefits payable to the policyholder are wholly or partly to be determined by reference to the value of, or the income from, property of any description (whether or not specified in the contract) or by reference to fluctuations in, or in an index of, the value of property of any description (whether or not so specified); and

(b) are not contracts specified in paragraph (4) below as being contracts to which this regulation does not apply.

(4) The contracts referred to in paragraph 3(b) above to which this regulation does not apply are—

(a) contracts with any policyholder who is a person not ordinarily resident in the United Kingdom;

(b) contracts to manage the investments of pension funds that are not combined with contracts of insurance covering either conservation of capital or payment of a minimum interest.

(5) Benefits payable under contracts referred to in paragraph (4)(b) above shall not be determined, either wholly or partly, by reference to the value of, or the income from, or fluctuations in the value of derivative contracts other than permitted derivative contracts as defined in paragraph 15 of Schedule 6.

(6) Any reference in this regulation to contracts of a similar description to any specified contract is a reference to contracts which correspond with that contract in both the following respects—

(a) the provisions defining the descriptions of property or indices by reference to which the benefits payable thereunder are to be determined are the same as in that contract; and

(b) the society or other person undertaking to pay the benefits provided for thereunder is the same as in that contract.

(7) In this regulation any reference to an ordinary long term contract is a reference to a contract the effecting of which constituted the carrying on of ordinary long term business.

Statutory notice: long term business

52

(1) Subject to the following provisions of this regulation—

(a) a statutory notice shall have the contents and be in the form set out in Schedule 7; and

(b) the notice of cancellation to be annexed to a statutory notice shall have the contents and be in the form set out in Schedule 8.

(2) A statutory notice shall be printed on a single sheet of paper.

(3) The lettering of statutory notices and notices of cancellation shall be easily legible; and capital letters and figures shall be used in all the places in which they are shown in the form as set out in Schedule 7.

(4) In statutory notices the lettering of the words “IMPORTANT—YOU SHOULD READ THIS CAREFULLY” shall be set out in larger printing that all other lettering and in bolder printing than all other lettering except that of main headings and subheadings.

(5) In statutory notices and notices of cancellation the lettering of all main headings and subheadings shall be set out in bolder printing than all other lettering except (in the case of a statutory notice) that of the words “IMPORTANT—YOU SHOULD READ THIS CAREFULLY”.

(6) In statutory notices and notices of cancellation there shall be substituted for words contained within square brackets in the appropriate Schedule and for the square brackets containing them the information or wording which, as indicated by those words, should be inserted there.

(7) For the purposes of this regulation and Schedules 7 and 8—

“notice of cancellation” means a notice of the kind mentioned in section 67B(4)(b) of the 1992 Act;

“statutory notice” means a notice of the kind mentioned in section 67B(4) of the 1992 Act;

and in the paragraphs in the form set out in Schedule 7 headed “Your right to withdraw from the transaction” the description or title of the person to whom the notice of cancellation should be sent may be substituted for or included with the name of that person.

PART VII — STATISTICAL INFORMATION

Interpretation: Part VII

53

In this Part of these Regulations—

(a) references to insurance business, general business and long term business do not include reinsurance business;

(b) “gross premiums” means premiums after deduction of discounts, refunds, rebates of premium and any taxes or levies that are related to those premiums but before deduction of premiums for reinsurance ceded and before deduction of commission payable by the society;

(d) references, in relation to the provision of general insurance or the carrying on of general business, to the groups of classes are to the following two groups—

(i) accident and sickness, that is to say, general business of classes 1 and 2 specified in Head B of Schedule 2 to the 1992 Act: and

(ii) miscellaneous financial loss, that is to say, general business of class 3 so specified.

Application: Part VII

54

This Part of these Regulations applies to a society to which section 37(2) or (3) of the 1992 Act applies.

Insurance statistics: EFTA States

55

(1) Every society to which this Part of these Regulations applies which provides, in any financial year ending after the commencement date, long term insurance in an EFTA State through an establishment in the United Kingdom shall prepare, in respect of long term insurance so provided by it, a statement of gross premiums receivable by each of classes 1 to VI specified in Head A of Schedule 2 to the 1992 Act.

(2) The statement prepared under paragraph (1) above shall show separately—

(a) gross premiums receivable in respect of commitments for which the society requires authorisation in the EFTA State in which the commitments are situated in accordance with Article 12 of the second life Directive; and

(b) gross premiums receivable in respect of commitments for which the society does not require authorisation in that EFTA State in accordance with Article 14 of that Directive.

(3) Every society to which this Part of these Regulations applies which, in any financial year ending after the commencement date, provides general insurance in an EFTA State through an establishment in the United Kingdom shall prepare, in respect of general insurance so provided by it—

(a) a statement of gross premiums receivable by each group of classes; and

(b) where the gross premiums earned in respect of general insurance so provided by its exceed 2,500,000 ECU, an underwriting account showing, in respect of each group of classes, the items specified in paragraph (6) below.

(4) A separate statement and underwriting account shall be prepared under paragraph (1) and (3) above in respect of each EFTA State in which the society provides the insurance.

(5) If—

(a) in respect of general insurance provided by it in the EFTA State concerned through all its establishments (in the United Kingdom and elsewhere), the society earns in any financial year ending after the commencement date gross premiums in excess of 2,500,000 ECU; and

(b) the supervisory authorities of that EFTA State request the Commission to give a direction under this paragraph,

the Commission may by notice in writing direct the society in future to prepare, in respect of general insurance provided by it in that EFTA State through an establishment in the United Kingdom, an underwriting account showing, in respect of each group of classes, the items specified in paragraph (6) below.

(6) For the purposes of paragraphs (3) and (5) above the items which the underwriting account must show are as follows—

(a) the total gross premiums earned in the financial year;

(b) the total cost of gross claims incurred in the financial year;

(d) the gross underwriting result.

(7) In paragraph (6) above—

(a) the gross premiums mentioned in subparagraph (a) are the gross premiums written in the financial year in addition to gross premiums unearned brought forward less gross premiums unearned carried forward;

(b) the gross claims mentioned in subparagraph (b) are the gross claims paid in the financial year in addition to gross claims outstanding carried forward less gross claims outstanding brought forward, and including directly attributable expenses;

(c) the gross commission mentioned in subparagraph (c) is the gross commission paid in the financial year plus gross commission brought forward less gross commission carried forward; and

(d) the gross underwriting result mentioned in subparagraph (d) is reached by deducting from the amount in subparagraph (a) the amounts referred to in subparagraphs (b) and (c).

(8) In respect of any financial year part of which falls before the commencement date, any statement or underwriting account required by paragraph (1), (3) or (5) above may be prepared solely in respect of long term or general insurance provided on or after that date.

Insurance statistics: member States

56

(1) Every society to which this Part of these Regulations applies which in a financial year ending after the commencement date—

(a) carries on long term business in a member State other than the United Kingdom through an overseas branch in that State; or

(b) provides long term insurance in a member State other than the United Kingdom through an establishment in another member State,

shall prepare in respect of long term business so carried on by it, or long term insurance so provided by it, a statement of gross premiums receivable by each of classes I to VII specified in head A of Schedule 2 to the 1992 Act.

(2) Every society to which this Part of these Regulations applies which in a financial year ending after the commencement date—

(a) carries on general business in a member State other than the United Kingdom through an overseas branch in that State; or

(b) provides general insurance in a member State other than the United Kingdom through an establishment in another member State,

shall prepare in respect of general business so carried on by it, or general insurance so provided by it, a statement of gross premiums receivable by each group of classes.

(3) The statements referred to in paragraphs (1) and (2) above shall be prepared separately in respect of each member State in which the society carries on the insurance business or provides the insurance.

(4) Subject to paragraph (5) below, in respect of any financial year part of which falls before the commencement date, the statement required by paragraph (1) and (2) above may be prepared solely in respect of long term or general insurance so provided or so carried on on or after that date.

(5) Paragraph (4) above does not apply in relation to any insurance provided in a member State before the commencement date where the society had notified the Commission of its intention to provide such insurance under section 57(1) or 57A(1) of the 1992 Act prior to 1st January 1994.

Regulations 55 and 56: supplementary provisions

57

(1) Where a statement or underwriting account is prepared by a society under regulation 55(1), (3) or (5), or 56(1) or (2) above, the society shall—

(a) cause the statement or account to be printed; and

(b) deposit three copies of the statement or account with the Commission within nine months after the end of the financial year to which it relates,

but the Commission may extend that period of nine months by such period (not exceeding three months) as it thinks fit.

(2) One of the copies of any statement or account deposited under paragraph (1) above shall be signed by the chief executive or secretary of the society.

(3) The Commission shall—

(a) consider any statement or account deposited under paragraph (1) above, and

(b) if the statement or account appears to it to be inaccurate or incomplete in any respect, communicate with the society with a view to the correction of any inaccuracies and the supply of any deficiencies.

Notification of non-provision of insurance or non-carrying on of business

58

(1) Subject to paragraph (2) below, where a society which has notified the Commission—

(a) in accordance with paragraph 1 of Schedule 13B to the 1992 Act, of its intention to establish an overseas branch in a member State other than the United Kingdom; or

(b) in accordance with paragraph 5 or 9 of that Schedule, of its intention to provide insurance in an EEA State other than the United Kingdom,

does not in any financial year carry on insurance business or, as the case may be, provide insurance in that State, it shall send to the Commission a notification of that fact within nine months after the end of the financial year to which the notification relates, signed by the chief executive or secretary of the society.

(2) Paragraph (1) above shall not apply if the society has, before the beginning of the financial year, informed the Commission that it no longer intends to carry on insurance business or, as the case may be, provide insurance in the member State or EEA State in question.

(3) The Commission shall—

(a) consider any notification given under paragraph (1) above; and

(b) if the notification appears to it to be inaccurate or incomplete in any respect, communicate with the society with a view to the correction of any inaccuracies and the supply of any deficiencies.

Default in complying with regulations 55 to 58

59

(1) A society shall be guilty of an offence if it makes default in complying with any of regulations 55 to 58 above.

(2) A person shall be guilty of an offence if either—

(a) he causes or permits to be included in a document deposited with the Commission under regulation 57(1) above a statement which he knows to be false in a material particular; or

(b) he recklessly causes or permits to be so included a statement which is false in a material particular.

(3) A person guilty of an offence under this regulation shall be liable—

(a) on summary conviction in Great Britain, to a fine not exceeding level 5 on the standard scale; and

(b) on summary conviction in Northern Ireland, to a fine not exceeding £2,000.

PART VIII — MISCELLANEOUS

Annual actuarial investigation: prescribed societies

60

A friendly society which is an incorporated friendly society carrying on long term business, and is not a society to which section 37(2) of the 1992 Act applies, is prescribed for the purposes of section 46(1)(b) of the 1992 Act and accordingly shall, once in every period of 12 months, cause an investigation to be made by the appropriate actuary into the financial condition of the society in respect of its long term business in accordance with section 46 of that Act.

Annual investigation: signature of copy of abstract

61

(1) For the purposes of section 46(3) of the 1992 Act (signature of a copy of an abstract of an actuary’s report), one copy of the abstract of the actuary’s report shall be signed by the following persons:

(a) the actuary who prepared the report;

(b) the chief executive;

(d) subject to paragraph (2) below, one member of the committee of management.

(2) Where the offices of chief executive and secretary are held by the same person, the copy of the abstract shall be signed, in addition to the persons referred to in paragraphs (1)(a) and (b) above, by two members of the committee of management.

Transitional provision

62

(1) Notwithstanding regulation 3(2) above, an authorised registered friendly society is not prescribed for the purposes of section 48(1)(c) of the 1992 Act until the first investigation return date, and accordingly Part II of these Regulations shall not apply to such a society until that date.

(2) For the purposes of paragraph (1) above, the “first investigation return date” is the date by which, in accordance with section 47(2) of the 1992 Act, a society is required to send to the Commission an abstract of the appropriate actuary’s report on the first investigation into the society’s financial condition or, if earlier, the date on which the society sends that abstract to the Commission.

Revocations

63

(1) The Friendly Societies (Insurance Business No. 2) Regulations 1993[^f00020] are hereby revoked.

(2) Regulations 8 to 13 of the Friendly Societies (Amendment) Regulations 1993[^f00021] are hereby revoked.

SCHEDULE 1 — LONG TERM BUSINESS MARGIN OF SOLVENCY

Long term classes I and II

1

(1) For long term business of class I or II the required margin of solvency shall be determined by taking the aggregate of the results arrived at by applying the calculation described in subparagraph (2) below (“the first calculation”) and the calculation described in subparagraphs (3), (4) and (5) below (“the second calculation”).

(2) For the first calculation—

(a) there shall be taken a sum equal to 4 per cent. of the mathematical reserves for direct business and reinsurance acceptances without any deduction for reinsurance cessions;

(b) the amount of the mathematical reserves at the end of the last preceding financial year after the deduction of reinsurance cessions shall be expressed as a percentage of the amount of those mathematical reserves before any such deduction; and

(i) where the percentage arrived at under paragraph (b) above is greater than 85 per cent., by that greater percentage, and

(ii) in any other case, by 85 per cent..

(3) For the second calculation—

(a) there shall be taken, subject to subparagraphs (4) and (5) below, a sum equal to 0.3 per cent. of the capital at risk for contracts on which the capital at risk is not a negative figure;

(b) the amount of the capital at risk at the end of the last preceding financial year for contracts on which the capital at risk is not a negative figure, after the deduction of reinsurance cessions, shall be expressed as a percentage of the amount of that capital at risk before any such deduction; and

(i) where the percentage arrived at under paragraph (b) above is greater than 50 per cent., by that greater percentage, and

(ii) in any other case, by 50 per cent.

(4) Where a contract provides for benefits payable only on death within a specified period and is valid for a period of not more than three years from the date when the contract was first made, the percentage to be taken for the purposes of subparagraph (3)(a) above shall be 0.1 per cent; and where the period of validity from the date is more than three years but not more than five years, the percentage to be so taken shall be 0.15 per cent.

(5) For the purposes of subparagraph (4) above, the period of validity of the contract evidencing a group policy is the period from the date when the premium rates under the contract were last reviewed for which the premium rates are guaranteed.

(6) For the purposes of the second calculation, the capital at risk is—

(a) in any case in which an amount is payable in consequence of death other than a case falling within paragraph (b) below, the amount payable on death; and

(b) in any case in which the benefit under the contract in question consists of the making, in consequence of death, of the payment of an annuity, payment of a sum by instalments or any other kind of periodic payments, the present value of that benefit,

less in either case the mathematical reserves in respect of the relevant contracts.

(7) When the amount of the mathematical reserves referred to in subparagraph (2)(a) above, or the amount of the capital at risk referred to in subparagraph (3)(a) above, is to be calculated for the purposes of determining the required margin of solvency, the day as on which that amount is calculated shall be the same as that on which the margin of solvency is determined; and the mathematical reserves referred to in subparagraph (6) above shall also be calculated as on that day when the capital at risk in question is that referred to in subparagraph (3)(a) above, but shall be calculated as at the end of the last preceding financial year when the capital at risk in question is that referred to in subparagraph (3)(b) above.

Long term classes III and VII

2

(1) 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.

(2) In so far as a society bears an investment risk, the first calculation shall be applied.

(3) In so far as—

(a) a society bears no investment risk; and

(b) the total expired and unexpired term of the relevant contract exceeds five years; and

(c) 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.

(4) If neither subparagraph (2) nor subparagraph (3) above applies, then, subject to subparagraph (5) below, the required margin of solvency is zero.

(5) 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.

Long term classes IV and VI

3

For long term business of class IV or VI the required margin of solvency shall be determined by applying the first calculation.

Long term class V

4

For long term business of class V the required margin of solvency shall be equal to 1 per cent. of the assets of the relevant tontine.

SCHEDULE 2 — GENERAL BUSINESS SOLVENCY MARGIN: FIRST METHOD OF CALCULATION (PREMIUM BASIS)

1

In this Schedule—

“gross premiums”, in relation to a society and a financial year— means premiums after deduction of discounts, refunds and rebates of premium but before deduction of premiums for reinsurance ceded and before deduction of commission payable by the society; and includes premiums receivable by the society under reinsurance contracts accepted by the society,

“receivable”, in relation to a society, a financial year and a premium, means recorded in the society’s books as due to the society in respect of— a contract commencing in that year; or a contract not accounted for in an annual revenue account of the society prior to that year, even though the contract commenced in an earlier financial year, whether or not the society has received the premium;

“recoverable”, in relation to a society and a financial year, means recorded in the society’s books as due in that year, whether or not the society has received any payment;

“taxes included in the premiums” shall have the same meaning as the words “taxes pertaining to the premiums” in the third indent of the first subparagraph of Article 16(3) of the first general insurance Directive.

2

The gross premiums receivable in respect of the society’s entire general business for the last preceding financial year shall be aggregated.

3

From the aggregate arrived at under paragraph 2 above there shall be deducted—

(a) any taxes included in the premiums mentioned in paragraph 2 above; and

(b) any levies that are related to premiums and are recorded in the society’s books as payable in the last preceding financial year in respect of general business.

4

The amount arrived at under paragraph 3 above shall be multiplied by twelve and divided by the number of months in the financial year.

5

If the amount arrived at under paragraph 4 above is more than 10 million ECU, it shall be divided into two portions, the former consisting of 10 million ECU and the latter comprising the excess.

6

Where there has been a division into two portions pursuant to paragraph 5 above, there shall be calculated and added together 18 per cent., and 16 per cent. of the two portions respectively; and where there has been no such division, there shall be calculated 18 per cent. of the amount arrived at under paragraph 4 above.

7

In the case of general business consisting of health insurance based on actuarial principles, paragraph 6 above shall apply with the substitution of “6 per cent.” for “18 per cent.” and “51/3 per cent.” for “16 per cent.”, but only if all the necessary conditions are satisfied.

8

For the purposes of paragraph 7 above, the necessary conditions are as follows, that is to say—

(a) the gross premiums receivable shall be calculated on the basis of sickness tables appropriate to insurance business;

(b) the reserves shall include provision for increasing age;

(d) it shall not be possible for the society to cancel the contract after the end of the third year of insurance;

(e) the contract shall provide for the possibility of increasing premiums or reducing payments during its currency.

9

Where paragraph 7 above applies to a society whose general business consists partly of health insurance based on actuarial principles and partly of other business, the procedure provided in paragraphs 2 to 7 above shall operate separately for each part of the general business, so as to produce a sum under paragraph 7 above for the health insurance and a sum under paragraph 6 above for the other business.

10

(1) If the provision for claims outstanding at the end of the last preceding financial year exceeds the provision for claims outstanding at the beginning of that year, the amount of the excess shall be added to the amount of claims paid in the last preceding financial year.

(2) If the provision for claims outstanding at the beginning of the last preceding financial year exceeds the provision for claims outstanding at the end of that year, the amount of the excess shall be deducted from the amount of claims paid in the last preceding financial year.

11

(1) For the purposes of paragraph 10 above, the amount of claims paid, in relation to a society and a financial year, is the amount that is recorded in the society’s books at the end of the financial year as paid by it (whether or not payment has been effected in that year) in full or partial settlement of—

(a) the claims described in subparagraph (2) below; and

(b) the expenses described in subparagraph (3) below,

less any recoverable amounts within the meaning of subparagraph (4) below.

(2) The claims mentioned in subparagraph (1) above are claims under contracts of insurance (and under contracts of reinsurance accepted by the society) including claims relating to business accounted for over a longer period than a financial year.

(3) The expenses mentioned in subparagraph (1) above are expenses (such as, for example, legal or medical costs) which are incurred by the society, whether through the employment of its own staff or otherwise, and are directly attributable to the settlement of individual claims, whether or not the individual claims in question are those mentioned in subparagraph (1) above.

(4) Recoverable amounts for the purposes of subparagraph (1) above are amounts recoverable by the society in respect of the claims mentioned in that subparagraph or other claims, including amounts recoverable from third parties and amounts recoverable from other insurers but excluding amounts recoverable in respect of reinsurance ceded by the society.

12

(1) For the purposes of paragraph 10 above, the provisions for claims outstanding, in relation to a society and a financial year, is (subject to any applicable valuation regulations in Part IV of these Regulations) the amount set aside by the society as at the beginning or end of the financial year as being an amount likely to be sufficient to meet—

(a) the claims described in subparagraph (2) below; and

(b) the expenses described in subparagraph (3) below,

less any recoverable amounts within the meaning of subparagraph (4) below.

(2) The claims mentioned in subparagraph (1) above are claims under contracts of insurance in respect of incidents occurring—

(a) in the case of an amount set aside as at the beginning of the financial year, before the beginning of that year, and

(b) in the case of an amount set aside as at the end of a financial year, before the end of that year,

being claims which have not been treated as claims paid and including claims relating to business accounted for over a longer period than a financial year, claims the amounts of which have not been determined and claims arising out of incidents that have not been notified to the society.

(3) The expenses mentioned in subparagraph (1) above are expenses (such as, for example, legal or medical costs) which are likely to be incurred by the society, whether through the employment of its own staff or otherwise and are directly attributable to the settlement of individual claims, whether or not the individual claims in question are those mentioned in subparagraph (1) above.

(4) Recoverable amounts for the purposes of subparagraph (1) above are amounts estimated by the society to be recoverable by it in respect of the claims mentioned in that subparagraph, including amounts recoverable from third parties and amounts recoverable from other insurers but excluding amounts recoverable in respect of reinsurance ceded by the society.

13

From the amount determined under paragraph 10(1) or (2) above there shall be deducted the total sum recoverable in respect of that amount under reinsurance contracts ceded.

14

The amount determined under paragraph 13 above shall be expressed as a percentage of the amount determined under paragraph 10(1) or (2) above.

15

The sum arrived at under paragraph 6 or 7 above or the aggregate of the sums arrived at under those paragraphs, as the case may be, shall be multiplied—

(a) where the percentage arrived at under paragraph 14 above is greater than 50 per cent. but not greater than 100 per cent., by the percentage so arrived at,

(b) where the percentage so arrived at is greater than 100 per cent., by 100 per cent., and

SCHEDULE 3 — GENERAL BUSINESS SOLVENCY MARGIN: SECOND METHOD OF CALCULATION (CLAIMS BASIS)

1

In this Schedule “reference period”, in relation to a society, means the three last preceding financial years.

2

If a society has not been in existence long enough to acquire a reference period, this Schedule shall be deemed to give a lower result than that given by Schedule 2 and shall otherwise not apply to the society.

3

(1) If the provision for claims outstanding at the end of the reference period exceeds the provision for claims outstanding at the beginning of the reference period, the amount of the excess shall be added to the amount of claims paid in the reference period.

(2) If the provision for claims outstanding at the beginning of the reference period exceeds the provision for claims outstanding at the end of the reference period, the amount of the excess shall be deducted from the amount of claims paid in the reference period.

(3) For the purposes of this paragraph, the expressions “amount of claims paid” and “provision for claims outstanding” have, in relation to a reference period, the same meaning as they have in paragraph 10 of Schedule 2 in relation to a financial year.

4

The aggregate obtained under paragraph 3(1) or (2) above shall be divided by the number of months in the reference period and multiplied by twelve.

5

If the amount arrived at under paragraph 4 above is more than 7 million ECU, it shall be divided into two portions, the former consisting of 7 million ECU and the latter comprising the excess.

6

Where there has been a division into two portions pursuant to paragraph 5 above, there shall be calculated and added together 26 per cent. and 23 per cent. of the two portions respectively; and where there has been no such division, there shall be calculated 26 per cent. of the amount arrived at under paragraph 4 above.

7

In the case of general business consisting of health insurance based on actuarial principles, paragraph 6 above shall apply with the substitution of “8 2/3 per cent.” for “26 per cent.” and “7 2/3 per cent.” for “23 per cent.”, but only if all the necessary conditions are satisfied.

8

The necessary conditions for the purposes of paragraph 7 above are the same as those set out in paragraph 8 of Schedule 2.

9

In a case of the kind mentioned in paragraph 9 of Schedule 2, that paragraph shall apply (with the necessary modifications) so as to produce separate sums under paragraphs 6 and 7 above.

10

The sum arrived at under paragraph 6 or 7 above or the aggregate of the sums arrived at under those paragraphs, as the case may be, shall be multiplied by the same percentage as is applicable for the purposes of paragraph 15 of Schedule 2.

SCHEDULE 4 — VALUE OF DEPENDANTS

PART I — THE SUPPLEMENTARY AMOUNT

1

Subject to paragraph 2(1) below, the supplementary amount in relation to assets of a relevant description held by a dependant of a society shall be determined in accordance with the following formula—

$$A=BC×D$ in which— A is the supplementary amount; B is the amount by which the value of assets of that description held by the dependant, excluding any long term business assets of the dependant if it is an insurance company, exceeds the permitted limit applicable to the dependant in relation to those assets; C is the aggregate of the amount specified in B above and of the amounts by which the value of assets of the same description held by other relevant dependants, excluding any long term business assets of a dependant which is an insurance company, exceeds respectively the permitted limits applicable to such other relevant dependants in relation to those assets; D is— where the society holds no assets of the same description of the relevant class, the amount of the permitted limit that would be applicable to the society in relation to such assets were it to hold them; and where the society holds assets of the same description of the relevant class, the amount by which the permitted limit applicable to the society in relation to those assets exceeds the value of those assets.$

2

(1) Where for the purpose of determining any supplementary amount in accordance with paragraph 1 above the society cannot reasonably ascertain—

(a) the value of any asset of a relevant dependant; or

(b) the amount of the permitted limit applicable in relation to any asset of a relevant dependant,

the asset in question shall be left out of account for that purpose.

(2) In this Part of this Schedule—

“relevant dependant” means— where this Schedule is being applied in relation to the determination of the value of a share in, or debt due or to become due from, a dependant of the society which is a long term business asset of the society, any dependant of the society— a share in which, or in any body (whether incorporated or not) of which it is a jointly controlled body, is a long term business asset of the society; or from which a debt is due, or will become due, to the society which is a long term business asset of that society; and in any other case, any dependant of the society— a share in which, or in any body (whether incorporated or not) of which it is a jointly controlled body, is a general business asset of the society; or from which a debt is due, or will become due, to the society which is a general business asset of that society.

PART II — FURTHER PROVISIONS AND MODIFICATIONS OF THE REGULATIONS APPLICABLE WITH RESPECT TO THE DETERMINATION OF THE VALUE OF DEPENDANTS

3

(1) This paragraph applies where, for the purpose of ascertaining the value of the assets of the subject company under regulation 22 above, any determination falls to be made in accordance with regulation 22 of the value of the assets of a dependant of the society, a share in which, or a debt due or to become due from which, is an asset of the subject company; and reference herein to a determination of the value of assets of a dependant to which this paragraph applies are references to any such determination.

(2) Regulation 22(4) shall not apply with respect to a determination of the value of assets of a dependant to which this paragraph applies.

(3) Where, in the case of a determination of the value of assets of a dependant to which this paragraph applies—

(a) the dependant is an insurance company and has general business assets of a relevant description or is not an insurance company and has assets of a relevant description,

(b) the value of such assets exceeds the permitted limit applicable to the dependant in relation to those assets; and

(c) any controller of the dependant has no assets of the same description of the relevant class, or has assets of the same description of the relevant class and their value is less than the permitted limit applicable to that controller in relation to those assets;

then, for the purposes of such determination, there shall be added to the permitted limit applicable to the dependant in relation to the assets referred to in paragraph (a) above an amount equal to the supplementary amount or, if there is more than one such controller, to the aggregate of the supplementary amounts, determined with respect to any such controller in accordance with Part I of this Schedule, subject where the controller is not the society, to the modifications specified in subparagraph (5) below.

(4) In this paragraph, “a controller” means, in relation to a dependant—

(a) the society; and

(b) the subject company, if it is an insurance company.

(5) Where subparagraph (3) above is being applied in relation to a controller, other than the society—

(a) Part I of this Schedule, as applied in accordance with the said subparagraph (3), shall have effect as if, for the reference to the society, there were substituted references to the controller; and

(b) the references to assets being of a relevant class in the said subparagraph (3) and in Part I of this Schedule, as so applied, shall be construed as referring to long term business assets of the controller, if subparagraph (3) is being applied in connection with the determination of the value of a long term business asset of the controller, and to general business assets of the controller, in any other case.

4

The modifications of these Regulations applicable (in addition to that specified in paragraph 3(2) above) with respect to the determination of the value of the assets of the subject company where it is not an insurance company are as follows—

(a) these Regulations shall apply to the subject company as if it were an insurance company and its assets were being valued for the purpose specified in regulation 45(1) of the 1994 Regulations;

(b) regulation 45(2) of the 1994 Regulations shall not apply; and

5

In this Schedule, “subject company” means the dependant of the society the value of whose assets is being determined in accordance with regulation 22(2) or (3) (as the case may be).

SCHEDULE 5 — ASSETS TO BE TAKEN INTO ACCOUNT ONLY TO A SPECIFIED EXTENT

PART I

Descriptions of Asset	Percentage of general business or long term business amount
1. A piece of land or a number of pieces of such land to which in the most recent proper valuation of such pieces of land an aggregate value is ascribed which is greater than the aggregate of the value of each of such pieces of land valued separately.	5%
2. Debts due, or which will become due, to the society from an individual (other than an individual who is connected with the society within the meaning of section 31(5) of the 1982 Act), being debts which are fully secured on any dwelling or any land appurtenant (or in Scotland, appertaining) thereto owned or to be purchased by the individual and used or to be used by him for his own residence.	1%
3. Unsecured debts, other than listed debentures or debts from an approved counterparty, which are debts due, or which will become due, (including debts which would become due if the society were to exercise any right to which it is entitled to require payment or repayment of the same) from a regulated institution and any of its connected companies (not being a dependant of the society).	2½%
4. Unsecured debts, other than listed debentures or debts from a regulated institution, which are debts due, or which will become due, to the society (including debts which would become due if the society were to exercise any right to which it is entitled to require payment or repayment of the same) from—
any one company and any of its connected companies (not being a dependant of the society)	1%
any one unincorporated body of persons	1%
5. Debts due or which will become due, to the society from an individual (other than debts specified in regulation 23(3) above or paragraph 2 or 4(b) above).	¼%
6. The aggregate of debts, other than debentures, of the description in paragraph 4 above.	5%
7. Listed equity shares in any one company and any of its connected companies (not being a dependant of the society).	2½%
8. Listed shares (including listed equity shares) and listed debentures in any one company and any of its connected companies (not being a dependant of the society or an approved counterparty).	5%
9. Unlisted shares in any one company and any of its connected companies (not being a dependant of the society).	1%
10. The aggregate of unlisted debentures of the descriptions in paragraphs 3 and 4 above and of unlisted shares and debt of the descriptions in paragraph 9 above.	10%
11. Holdings in an authorised unit trust scheme or a recognised scheme (other than a scheme falling within the Council Directive 85/611/EEC of 20 December 1985 on the co-ordination of laws, regulations and administrative provisions relating to undertakings for collective investments in transferable securities)[^f00022].	5%
12. Subject to paragraph 13 below, shares held in or secured or unsecured debts (including debts which would become due if the society were to exercise any right to which it is entitled to require payment or repayment of the same) or the value of rights under derivative contracts due, or which will become due, from— an individual; or any one company and any of its connected companies (not being a dependant of the society); or
any one unincorporated body of persons	5%
13. Shares, debts and rights under derivative contracts to which the limitations in paragraph 12 apply, the holdings of which exceed 5% but which in aggregate are taken into account for no more than 40% of the business amount.	10%
14. Shares, debts and rights under derivative contracts to which the limitations in paragraph 12 and 13 apply which are issued by any one approved credit institution and any of its connected companies together with deposits held in that institution and any of its connected companies (not being a dependant of the society).	20%
15. Cash.	3%
16. Computer equipment.	5%
17. Office machinery (other than computer equipment), furniture, motor vehicles and other equipment.	2½%

PART II

18

In this Schedule, a company is connected with another company if it is—

(a) a subsidiary of that other company; or

(b) the holding company of that other company; or

19

In this Schedule, references to “subsidiary” and “holding company” shall have the same meanings as they have in section 96 of the 1982 Act.

SCHEDULE 6 — PERMITTED LINKS

PART I — DESCRIPTIONS OF PROPERTY BY REFERENCE TO WHICH BENEFITS MAY BE DETERMINED

1

Securities (other than derivative contracts) which are listed.

2

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