The Risk Transformation Regulations 2017

JurisdictionUK Non-devolved
CitationSI 2017/1212

2017 No. 1212

Financial Services And Markets

The Risk Transformation Regulations 2017

Made 5th December 2017

Coming into force in accordance with regulation 1(2)

The Treasury are a government department designated1for the purposes of section 2(2) of the European Communities Act 19722in relation to financial services.

In the opinion of the Treasury, one of the effects of these Regulations is that an activity which is not a regulated activity, within the meaning of the Financial Services and Markets Act 20003, will become a regulated activity.

In the opinion of the Treasury, one of the effects of these Regulations is that an activity will become a PRA-regulated activity within the meaning of the Financial Services and Markets Act 20004.

A draft of these Regulations has been laid before and approved by a resolution of each House of Parliament in accordance with paragraph 2 of Schedule 2 to the European Communities Act 19725and sections 22B and 429(1) and (2) of, and paragraph 26(2) of Schedule 2 to, the Financial Services and Markets Act 20006.

The Treasury, in exercise of the powers conferred by section 2(2) of the European Communities Act 19727and sections 22(1) and (5), 22A, 55C, 284A, 426 and 428(3) of, and paragraph 25 of Schedule 2 to, the Financial Services and Markets Act 20008, make the following Regulations:

1 General

PART 1

General

Citation and commencement
S-1 Citation and commencement

Citation and commencement

1.—(1) These Regulations may be cited as the Risk Transformation Regulations 2017.

(2) These Regulations come into force 3 days after the day on which they are made.

Interpretation: general
S-2 Interpretation: general

Interpretation: general

2.—(1) In these Regulations—

“alternative inspection location” means any place at which a protected cell company keeps the documents and records relating to the protected cell company, other than the protected cell company’s registered office;

“appropriate registrar” means—

(a) the registrar of companies for England and Wales if a protected cell company’s instrument of incorporation states that its registered office is situated in England and Wales (or Wales);

(b) the registrar of companies for Scotland if a protected cell company’s instrument of incorporation states that its registered office is situated in Scotland;

(c) the registrar of companies for Northern Ireland if a protected cell company’s instrument of incorporation states that its registered office is situated in Northern Ireland;

“asset” includes any interest in an asset, any right over an asset or any property;

“cell” has the meaning given in regulation 43;

“contractual arrangement” has the same meaning as in the Implementing Technical Standard;

“core” has the meaning given in regulation 42;

“counsel” means a person who is—

(a) a barrister within the meaning given in section 207 of the Legal Services Act 20079;

(b) a practising member of the faculty of advocates in Scotland; or

(c) a barrister who has been called to the bar in Northern Ireland and who holds a current practising certificate;

“creditor” incudes a contingent or prospective creditor;

“debenture” includes debenture stock, bonds and any other securities;

FSMA” means the Financial Services and Markets Act 2000;

“general meeting” means a meeting of the persons holding voting shares issued on behalf of the core of the protected cell company;

“Implementing Technical Standard” means Commission Implementing Regulation (EU) 2015/462 of 19th March 2015 laying down implementing technical standards with regard to the procedures for supervisory approval to establish special purpose vehicles, for the cooperation and exchange of information between supervisory authorities regarding special purpose vehicles as well as to set out formats and templates for information to be reported by special purpose vehicles in accordance with Directive 2009/138/ECof the European Parliament and of the Council10;

“insolvency legislation” means—

(a) the Insolvency Act 198611;

(b) the Insolvency (Northern Ireland) Order 198912;

(c) Part 24 of FSMA (insolvency);

(d) the Insolvency Act 200013;

(e) the Insolvency (Northern Ireland) Order 200214;

(f) the Bankruptcy (Scotland) Act 201615; and

(g) all subordinate legislation made under the legislation mentioned in sub-paragraphs (a) to (f);

“liability” includes a contingent or prospective liability;

“non-voting share” means a share which is not a voting share;

“officer” includes a director or manager;

“property” includes an interest in property or a right over property;

“the Regulated Activities Order” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 200116;

“share” means a share in the share capital of a protected cell company or a part of a protected cell company;

“share certificate” means documentary evidence of title to a share;

“solicitor” means a person who is—

(a) a solicitor within the meaning given by section 207 of the Legal Services Act 2007;

(b) enrolled on the roll of solicitors kept under section 7 of the Solicitors (Scotland) Act 198017; or

(c) a solicitor within the meaning given by Article 3(2) of the Solicitors (Northern Ireland) Order 197618;

“voting share” means a share which confers the right to vote on a written resolution of the protected cell company or at a meeting of shareholders;

“working day” has the meaning given in section 1173(1) of the Companies Act 200619.

(2) In these Regulations—

(a)

(a) a reference to a part of a protected cell company is a reference to the core or a cell of the protected cell company (see regulations 42 and 43);

(b)

(b) a reference to enforceable arrangements between cells is a reference to arrangements between cells which—

(i) have been made in accordance with regulations 68 and 69; and

(ii) have not been cancelled in accordance with regulation 70; and

(c)

(c) shares are of one class if the rights attached to them are in all respects uniform.

(3) Where these Regulations refer to the Welsh equivalent of a word or expression, the Welsh equivalent of that word or expression is set out in Table 6 in Schedule 1.

Meaning of “group of cells”
S-3 Meaning of “group of cells”

Meaning of “group of cells”

3.—(1) In these Regulations, a “group of cells” is a group of two or more cells in which each cell is linked to every other cell in the group.

(2) For the purposes of this regulation, two cells (“cell A” and “cell B”) are linked if the protected cell company has made enforceable arrangements between—

(a)

(a) cell A and cell B; or

(b)

(b) cell A and another cell which is linked to cell B.

2 Authorisation and supervision of insurance risk transformation

PART 2

Authorisation and supervision of insurance risk transformation

Amendment of FSMA
S-4 Amendment of FSMA

Amendment of FSMA

4.—(1) FSMA is amended as follows.

(2) In Schedule 6 (threshold conditions)20

(a)

(a) in Part 1D (Part 4A permission: conditions for which the PRA is responsible in relation to insurers etc), in paragraph 4A (introduction), after sub-paragraph (4), insert—

S-5

“5 If the person concerned (“C”) carries on, or is seeking to carry on, regulated activities which consist of or include a PRA-regulated activity relating to an assumption of risk falling within article 13A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, the threshold conditions which are relevant to the discharge by the PRA of its functions in relation to C are the conditions set out in paragraphs 4B to 4F, subject to sub-paragraph (6).

S-6

6 Paragraphs 4B to 4F have effect in relation to persons of the kind specified by sub-paragraph (5) as if—

(a) the persons are special purpose vehicles within the meaning given by Article 13(26) of the Solvency 2 Directive21;

(b) the persons are not reinsurance undertakings within the meaning given by Article 13(4) of the Solvency 2 Directive;

(c) references to contracts of insurance are references to contracts for the assumption of risk; and

(d) references to C’s policyholders are references to undertakings from whom C assumes a risk.”;

(b)

(b) in Part 1E (Part 4A permission: conditions for which the PRA is responsible in relation to other PRA-authorised persons), in paragraph 5A (introduction)—

(i) at the end of sub-paragraph (b), omit “or”;

(ii) at the end of sub-paragraph (c), insert “or”; and

(iii) after sub-paragraph (c), insert—

“(d)

“(d) an assumption of risk falling within article 13A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001,”.

Amendment of the Regulated Activities Order
S-5 Amendment of the Regulated Activities Order

Amendment of the Regulated Activities Order

5.—(1) The Regulated Activities Order is amended as follows.

(2) After article 12A (information society services and managers of UCITS and AIFs)22insert—

S-12B

Transformer vehicles: insurance risk transformation

12B. A transformer vehicle23does not carry on an activity of a kind specified by article 10 by assuming a risk from an undertaking, provided the assumption of the risk is a specified kind of activity falling within article 13A (transformer vehicles: insurance risk transformation).”.

(3) After article 13 (application of sections 327 and 332 of FSMA) insert—

CHAPTER 3A

Insurance risk transformation

S-13A

Transformer vehicles: insurance risk transformation

13A. It is a specified kind of activity for a transformer vehicle to assume a risk from an undertaking where—

(a) the undertaking assumes a risk under a contract of insurance (“the underlying risk”); and

(b) the assumption of risk by the transformer vehicle has the legal or economic effect of transferring some or all of the underlying risk to the transformer vehicle.”.

(4) After article 19 (risk-management)25insert—

S-19A

Transformer vehicles: insurance risk transformation

19A. A transformer vehicle does not carry on an activity of a kind specified by article 14 by assuming a risk from an undertaking, provided the assumption...

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