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COBS 21.2 Rules for firms engaged in linked long-term insurance business11

COBS 21.2.1RRP

For the purposes of determining policyholder benefits, a1 firm must ensure that the values of its permitted links and conditional permitted links4 are determined fairly and accurately.


1An insurer must not contract to provide benefits under linked long-term contracts of insurance that are determined wholly or partly, directly or indirectly, by reference to fluctuations in any index or wholly or partly by reference to the value of, or the income from, or fluctuations in the value of, property other than in accordance with the rules in this section.


1Insurers 3effecting linked long-term contracts of insurance are obliged to comply with the requirements on investments in the PRA Rulebook Solvency II Firms Investments.

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;4

  2. (2)

    before making any material changes; and4

  3. (3)

    (in relation to conditional permitted links) at other appropriate times, taking into account a policyholder’s needs.4



1A firm that has entered into a reinsurance contract in respect of its linked long-term insurance business must nevertheless discharge its responsibilities under its linked long-term insurance contracts, as if no reinsurance contract had been effected.


To comply with the requirements of COBS 21.2.4A R, a firm should:

  1. (1)

    disclose to policyholders the implications of any credit-risk exposure they may face in relation to the solvency of the reinsurer; and

  2. (2)

    suitably monitor the way the reinsurer manages the business in order to discharge its continuing responsibilities to policyholders.

Notification to the FCA

COBS 21.2.8RRP

A firm must notify the FCA1 in writing as soon as it becomes aware of any failure to meet the requirements of COBS 21, or of the PRA Rulebook Solvency II Firms Investments or the PRA Rulebook: Non-Solvency II firm sector2 to the extent applicable to linked long-term contracts of insurance.1

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 FCA2 will have regard to the extent to which the relevant circumstances are exceptional and temporary and to any other reasons for the failure.