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COBS 21.2 Principles for firms engaged in linked long-term insurance business

COBS 21.2.1RRP

A firm must ensure that the values of its permitted links are determined fairly and accurately.

COBS 21.2.2R

A firm must ensure that its linked assets:

  1. (1)

    are capable of being realised in time for it to meet its obligations to linked policyholders; and

  2. (2)

    are matched with its linked liabilities as required by the close matching rules.

COBS 21.2.3R

A firm must ensure that there is no reasonably foreseeable risk that the aggregate value of any of its linked funds will become negative.

COBS 21.2.4RRP

A firm must notify its linked policyholders of the risk profile and investment strategy for the linked fund:

  1. (1)

    at inception, and

  2. (2)

    before making any material changes.

COBS 21.2.5R

A firm must ensure that its systems and controls and other resources are appropriate for the risks associated with its linked assets and linked liabilities.

COBS 21.2.6R
  1. (1)

    A firm must ensure when selecting linked assets that there is no reasonably foreseeable risk of a conflict of interest with its linked policyholders.

  2. (2)

    If a conflict does arise, the firm must take reasonable steps to ensure that the interests of the linked policyholders are safeguarded.

COBS 21.2.7R

In applying the rules in this section, a firm must consider the economic effect of its permitted links and linked assets ahead of their legal form.

COBS 21.2.8RRP

A firm must notify the FSA in writing as soon as it becomes aware of any failure to meet the requirements of this section.

COBS 21.2.9GRP

In considering what action to take in response to written notification of a failure to meet the requirements of this section, the FSA will have regard to the extent to which the relevant circumstances are exceptional and temporary and to any other reasons for the failure.