Capital resources

Part

MIPRU Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries

Chapter

Capital resources

Printed on: 03/07/2024

Rulebook at: 01/01/2014

MIPRU 4

Capital resources

MIPRU 4.1

Application and purpose

01/01/2007

Application

MIPRU 4.1.1

This chapter applies to a firm with Part 4A permission to carry on any of the following activities, unless an exemption in this section applies:

(1) insurance mediation activity;
(2) home finance mediation activity;
(3) home financing;
(4) home finance administration.

01/04/2013

MIPRU 4.1.2

As this chapter applies only to a firm with Part 4A permission, it does not apply to an incoming EEA firm (unless it has a top-up permission). An incoming EEA firm includes a firm which is passporting into the United Kingdom under the Insurance Mediation Directive.

01/04/2013

MIPRU 4.1.3

The definition of insurance mediation activity refers to several activities 'in relation to a contract of insurance' which includes a contract of reinsurance. This chapter, therefore, applies to a reinsurance intermediary in the same way as it applies to any other insurance intermediary.

01/04/2013

Application: banks, building societies, insurers and friendly societies

MIPRU 4.1.4

This chapter does not apply to:

(1) a bank; or
(2) a building society; or
(3) a solo consolidated subsidiary of a bank or a building society; or
(4) an insurer; or
(5) a friendly society.

01/04/2013

MIPRU 4.1.5

The capital resources of the firms above are calculated in accordance with the appropriate prudential sourcebook.

01/04/2013

Application: firms carrying on designated investment business only

MIPRU 4.1.6

This chapter does not apply to a firm whose Part 4A permission is limited to regulated activities which are designated investment business.

01/04/2013

MIPRU 4.1.7

A firm which carries on designated investment business, and no other regulated activity, may disregard this chapter. For example, a firm with permission limited to dealing in investments as agent in relation to securities is only carrying on designated investment business and the Interim Prudential sourcebook for investment businesses or the Prudential sourcebook for Banks, Building Societies and Investment Firms, as appropriate, will apply. However, if its permission is varied to enable it to arrange motor insurance as well, this activity is not designated investment business so the firm will be subject to the higher of the requirements in this chapter and those sourcebooks (see MIPRU 4.2.5 R).

01/04/2013

Application: credit unions

MIPRU 4.1.8

This chapter does not apply to:

(1) a 'small credit union', that is one with:

(a) assets of £5 million or less; and
(b) a total number of members of 5,000 or less (see CREDS 5.3.13 R); or

(2) a credit union whose Part 4A permission includes mortgage lending or mortgage administration (or both) but not insurance mediation activity or mortgage mediation activity.

01/04/2013

MIPRU 4.1.9

(1) For credit unions to which this chapter applies and which are not CTF providers, the capital requirements will be the higher of the requirements in this chapter and in the Credit Unions sourcebook (see MIPRU 4.2.6 R).
(2) For credit unions to which this chapter applies and which are CTF providers with permission to carry on designated investment business, the capital requirements will be the highest of the requirements in this chapter, those in the Credit Unions sourcebook and in the Interim Prudential sourcebook for investment businesses (see MIPRU 4.2.6 R).
(3) A credit union cannot carry on home purchase activities or reversion activities because the Credit Unions Act 1979 (in relation to Great Britain credit unions) and the Credit Unions (Northern Ireland) Order 1985 (in relation to Northern Ireland credit unions) restricts the circumstances whereby credit unions can hold land.

01/04/2013

Application: Lloyd's managing agents

MIPRU 4.1.11

This chapter does not apply to a managing agent.

01/04/2013

MIPRU 4.1.12

The reason for excluding managing agents from the provisions of this chapter is twofold: first, a member will have accepted full responsibility for those activities under the Society's managing agent agreement. Secondly, the member is itself subject to capital requirements which are equivalent to those applying to an insurer (to which this chapter is also disapplied).

01/04/2013

Purpose

MIPRU 4.1.14

This chapter amplifies threshold condition 4 (Adequate resources) by providing that a firm must meet, on a continuing basis, a basic solvency requirement and a minimum capital resources requirement. This chapter also amplifies Principle 4 which requires a firm to maintain adequate financial resources by setting out capital requirements for a firm according to the regulated activity or activities it carries on.

01/04/2013

MIPRU 4.1.15

Capital has an important role to play in protecting consumers and complements the roles played by professional indemnity insurance and client money protection (see the client money rules). Capital provides a form of protection for situations not covered by a firm's professional indemnity insurance and it provides the funds for the firm's PII excess, which it has to pay out of its own finances (see MIPRU 3.2.11 R and MIPRU 3.2.12 R for the relationship between the firm's capital and its excess).

01/04/2013

MIPRU 4.1.16

More generally, having adequate capital gives the firm a degree of resilience and some indication to consumers of creditworthiness, substance and the commitment of its owners. It reduces the possibility of a shortfall of funds and provides a cushion against disruption if the firm ceases to trade.

01/04/2013

MIPRU 4.1.17

There is a greater risk to consumers, and a greater adverse impact on market confidence, if a firm holding client money or other client assets fails. For this reason, the capital resources rules in this chapter clearly distinguish between firms holding client assets and those that do not.

01/04/2013

MIPRU 4.2

Capital resources requirements

01/01/2007

General solvency requirement

MIPRU 4.2.1

A firm must at all times ensure that it is able to meet its liabilities as they fall due.

01/04/2013

General capital resource requirement

MIPRU 4.2.2

A firm must at all times maintain capital resources equal to or in excess of its relevant capital resources requirement.

01/04/2013

Capital resources: relevant accounting principles

MIPRU 4.2.3

A firm must recognise an asset or liability, and measure its amount, in accordance with the relevant accounting principles applicable to it for the purpose of preparing its annual financial statements unless a rule requires otherwise.

01/04/2013

Capital resorces: client assets

MIPRU 4.2.4

In this chapter, "client assets" includes a document only if it has value, or is capable of having value, in itself (such as a bearer instrument)

01/04/2013

Capital resources requirement: firms carrying on regulated activities including designated investment business

MIPRU 4.2.5

The capital resources requirement for a firm (other than a credit union) carrying on regulated activities, including designated investment business, is the higher of:

(1) the requirement which is applied by this chapter according to the activity or activities of the firm (treating the relevant rules as applying to the firm by disregarding its designated investment business); and
(2) the financial resource requirement which is applied by the Interim Prudential sourcebook for investment businesses, the Prudential sourcebook for Investment Firms and the EU CRR or the General Prudential sourcebook and the Prudential sourcebook for Banks, Building Societies and Investment Firms.

01/01/2014

Capital resources requirement: credit unions

MIPRU 4.2.6

The capital resources requirement for a credit union to which this chapter applies is the highest of:

(1) the requirement which is applied to firms carrying on mediation activities only (see MIPRU 4.2.11 R) treating that rule as applying to the credit union by disregarding activities which are not insurance mediation activity or mortgage mediation activity;
(2) the amount which is applied by the Credit Unions sourcebook; and
(3) if the credit union is a CTF provider that has a permission to carry on designated investment business, the amount which is applied by Chapter 8 of the Interim Prudential sourcebook for investment businesses.

01/04/2013

Capital resources requirement: application according to regulated activities

MIPRU 4.2.9

Unless any of the rules on capital resources for firms carrying on designated investment business, for credit unions or for social housing firms apply, the capital resources requirement for a firm varies according to the regulated activity or activities it carries on.

01/04/2013

MIPRU 4.2.10

Table: Application of capital resources requirements

Regulated activities

Provisions

(a) insurance mediation activity; or
(b) home finance mediation activity (or both); and no other regulated activity.

MIPRU 4.2.11 R

(a) home financing; or
(b) home financing and home finance administration ; and no other regulated activity.

MIPRU 4.2.12 R to MIPRU 4.2.17 E

home finance administration; and no other regulated activity.

MIPRU 4.2.18 R to MIPRU 4.2.19 R

insurance mediation activity; and
(a) home financing; or
(b) home finance administration (or both).

MIPRU 4.2.20 R

home finance mediation activity; and

(a) home financing, or

(b) home finance administration (or both).

MIPRU 4.2.21 R

Any combination of regulated activities not within rows 1 to 5.

MIPRU 4.2.22 R

01/04/2013

Capital resources requirement: mediation activity only

MIPRU 4.2.11

(1) If a firm carrying on insurance mediation activity or home finance mediation activity (and no other regulated activity) does not hold client money or other client assets in relation to these activities, its capital resources requirement is the higher of:

(a) £5,000; and
(b) 2.5% of the annual income from its insurance mediation activity or home finance mediation activity (or both).

(2) If a firm carrying on insurance mediation activity or home finance mediation activity (and no other regulated activity) holds client money or other client assets in relation to these activities, its capital resources requirement is the higher of:

(a) £10,000; and
(b) 5% of the annual income from its insurance mediation activity or home finance mediation activity (or both).

01/04/2013

Capital resources requirement: home financing and home finance administration (but not home finance administration only)

MIPRU 4.2.12

(1) The capital resources requirement for a firm carrying on home financing, or home financing and home finance administration (and no other regulated activity) is the higher of:

(a) £100,000; and
(b) 1% of:

(i) its total assets plus total undrawn commitments and unreleased amounts under the home reversion plan; less:
(ii) excluded loans or amounts plus intangible assets (see Note 1 in the table in MIPRU 4.4.4 R).

(2) Undrawn commitments and unreleased amounts means the total of those amounts which a customer has the right to draw down or to receive from the firm but which have not yet been drawn down or received, excluding those under an agreement:

(a) which has an original maturity of up to one year; or
(b) which can be unconditionally cancelled at any time by the lender or provider.

01/04/2013

MIPRU 4.2.13

When considering what is an undrawn commitment or unreleased amount, the appropriate regulator takes into account an amount which a customer has the right to draw down or to receive under a home finance transaction, but which has not yet been drawn down or received, whether the commitment or obligation is revocable or irrevocable, conditional or unconditional.

01/04/2013

MIPRU 4.2.14

When calculating total assets, the firm may exclude a loan or plan which has been transferred to a third party only if it meets the following conditions:

(1) the first condition is that the loan or the plan has been transferred in a legally effective manner by:

(a) novation; or
(b) legal or equitable assignment; or
(c) sub-participation; or
(d) declaration of trust; and

(2) the second condition is that the home finance provider:

(a) retains no material economic interest in the loan or the plan; and
(b) has no material exposure to losses arising from it.

01/04/2013

MIPRU 4.2.15

(1) When seeking to rely on the second condition, a firm should ensure that the loan or plan qualifies for the 'linked presentation' accounting treatment under Financial Reporting Standard 5 (Reporting the substance of transactions) issued in April 1994, and amended in December 1994 and September 1998 (if applicable to the firm).
(2) Compliance with (1) may be relied upon as tending to establish compliance with the second condition.

01/04/2013

MIPRU 4.2.16

The requirement that the loan qualifies for the 'linked presentation' accounting treatment under FRS 5 is aimed at those firms which report according to FRS 5. Other firms which report under other standards, including International Accounting Standards, need not adopt FRS 5 in order to meet the second condition.

01/04/2013

MIPRU 4.2.17

(1) When seeking to rely on the second condition, a firm should not provide material credit enhancement in respect of the loan or plan unless it deducts the amount of the credit enhancement from its capital resources before meeting its capital resources requirement.
(2) Credit enhancement includes:

(a) any holding of subordinated loans or notes in a transferee that is a special purpose vehicle; or
(b) over collateralisation by transferring loans or plans to a larger aggregate value than the securities to be issued; or
(c) any other arrangement with the transferee to cover a part of any subsequent losses arising from the transferred loan or plan.

(3) Contravention of (1) may be relied upon as tending to establish contravention the second condition.

01/04/2013

Capital resources requirement: home finance administration only

MIPRU 4.2.18

The capital resources requirement for a firm carrying on home finance administration only, which has all or part of the home finance transactions that it administers on its balance sheet, is the amount which is applied to a firm carrying on home financing or home financing and home finance administration (and no other regulated activity) (see MIPRU 4.2.12 R).

01/04/2013

MIPRU 4.2.19

The capital resources requirement for a firm carrying on home finance administration only, which has all the home finance transactions that it administers off its balance sheet, is the higher of:

(1) £100,000; and
(2) 10% of its annual income.

01/04/2013

Capital resources requirement: insurance mediation activity and home financing or home finance administration

MIPRU 4.2.20

The capital resources requirement for a firm carrying on insurance mediation activity and home financing or home finance administration is the sum of the requirements which are applied to the firm by:

(1) the capital resources rule for a firm carrying on insurance mediation activity or home finance mediation activity (and no other regulated activity) (see MIPRU 4.2.11 R); and
(2)

(a) the capital resources requirement rule for a firm carrying on home financing or home financing and home finance administration (and no other regulated activity) (see MIPRU 4.2.12 R); or
(b) if, in addition to its insurance mediation activity, the firm carries on home finance administration with all the assets that it administers off balance sheet, the capital resources rule for such a firm (see MIPRU 4.2.19 R).

01/04/2013

Capital resources requirement: home finance mediation activity and home financing or home finance administration

MIPRU 4.2.21

(1) If a firm carrying on home finance mediation activity and home financing or home finance administration does not hold client money or other client assets in relation to its home finance mediation activity, the capital requirement is the amount applied to a firm, according to the activities carried on by the firm, by:

(a) the capital resources requirement rule for a firm carrying on home financing or home financing and home finance administrator (and no other regulated activity) (see MIPRU 4.2.12 R); or in the case of a firm carrying on home financing which is not connected to regulated mortgage contracts or home finance administration which is not connected to regulated mortgage contracts, the amount applied to a firm under MIPRU 4.2.12 R; or
(b) if, in addition to its home finance mediation activity, the firm carries on home finance administration with all the assets that it administers off balance sheet, the capital resources rule for such a firm (see MIPRU 4.2.19 R).

(2) If the firm holds client money or other client assets in relation to its home finance mediation activity, the capital resources requirement is:

(a) the amount calculated under (1); plus
(b) the amount which is applied to a firm carrying on insurance mediation activity or home finance mediation activity (and no other regulated activity) that holds client money or other client assets in relation to these activities (see MIPRU 4.2.11R (2)).

01/04/2013

Capital resources requirement: other combinations of activities

MIPRU 4.2.22

The capital resources requirement for a firm carrying any other combination of regulated activities is the amount which is applied to a firm carrying on insurance mediation activity and home financing or home finance administration (see MIPRU 4.2.20 R).

01/04/2013

MIPRU 4.3

Calculation of annual income

01/01/2007

Annual income

MIPRU 4.3.1

This section contains provisions relating to the calculation of annual income for the purposes of:

(1) the limits of indemnity for professional indemnity insurance; and
(2) the capital resources requirements.

01/04/2013

MIPRU 4.3.2

'Annual income' is the annual income given in the firm's most recent annual financial statement from the relevant regulated activity or activities.

01/04/2013

MIPRU 4.3.3

For a firm which carries on insurance mediation activity or home finance mediation activity , annual income is the amount of all brokerage, fees, commissions and other related income (for example, administration charges, overriders, profit shares) due to the firm in respect of or in relation to those activities.

01/04/2013

MIPRU 4.3.4

(1) The purpose of the rule on annual income that applies to insurance intermediaries and mortgage intermediaries is to ensure that the capital resources requirement is calculated on the basis only of brokerage and other amounts earned by a firm which are its own income.
(2) Annual income includes commissions and other amounts the firm may have agreed to pay to other persons involved in a transaction, such as sub-agents or other intermediaries.
(3) A firm's annual income does not, however, include any amounts due to another person (for example, the product provider) which the firm has collected on behalf of that other person.

01/04/2013

MIPRU 4.3.5

If a firm is a principal, its annual income includes amounts due to its appointed representative in respect of activities for which the firm has accepted responsibility.

01/04/2013

MIPRU 4.3.6

If a firm is a network, it should include the relevant income due to all of its appointed representatives in its annual income.

01/04/2013

Annual income for home finance administration

MIPRU 4.3.7

For the purposes of the calculation of the capital resources of a firm carrying on home finance administration only with all the assets it administers off balance sheet, annual income is the sum of:

(1) revenue (that is, commissions, fees, net interest income, dividends, royalties and rent); and
(2) gains;
(3) arising in the course of the ordinary activities of the firm, less profit:

(a) on the sale or termination of an operation;
(b) arising from a fundamental reorganisation or restructuring having a material effect on the nature and focus of the firm's operation; and
(c) on the disposal of fixed assets, including investments held in a long-term portfolio.

01/04/2013

Annual income: periods of less than 12 months

MIPRU 4.3.8

If the firm's most recent annual financial statement does not cover a 12 month period, the annual income is taken to be the amount in the statement converted, proportionally, to a 12 month period.

01/04/2013

Annual income: no financial statements

MIPRU 4.3.9

If the firm does not have annual financial statements, the annual income is to be taken from the forecast or other appropriate accounts which the firm has submitted to the appropriate regulator.

01/04/2013

MIPRU 4.4

Calculation of capital resources

01/01/2007

The calculation of a firm's capital resources

MIPRU 4.4.1

(1) A firm must calculate its capital resources only from the items which are eligible to contribute to a firm's capital resources from which it must deduct certain items (see MIPRU 4.4.4 R).
(2) If the firm is subject to the Interim Prudential sourcebook for investment businesses, the Prudential sourcebook for Investment Firms and the EU CRR, the General Prudential sourcebook, the Prudential sourcebook for Banks, Building Societies and Investment Firms or the Credit Unions sourcebook, the capital resources are the higher of:

(a) the amount calculated under (1); and
(b) the financial resources calculated under those sourcebooks and regulations.

01/01/2014

MIPRU 4.4.2

Table: Items which are eligible to contribute to the capital resources of a firm

Item

Additional explanation

Share capital

This must be fully paid and may include:

(1)

ordinary share capital; or

(2)

preference share capital (excluding preference shares redeemable by shareholders within two years).

Capital other than share capital (for example, the capital of a sole trader, partnership or limited liability partnership)

The capital of a sole trader is the net balance on the firm's capital account and current account. The capital of a partnership is the capital made up of the partners':

(1)

capital account, that is the account:

(a)

into which capital contributed by the partners is paid; and

(b)

from which, under the terms of the partnership agreement, an amount representing capital may be withdrawn by a partner only if:

(i) he ceases to be a partner and an equal amount is transferred to another such account by his former partners or any person replacing him as their partner; or

(ii) the partnership is otherwise dissolved or wound up; and

(2)

current accounts according to the most recent financial statement.

For the purpose of the calculation of capital resources, in respect of a defined benefit occupational pension scheme:

(1)

a firm must derecognise any defined benefit asset;

(2)

a firm may substitute for a defined benefit liability the firm's deficit reduction amount, provided that the election is applied consistently in respect of any one financial year.

Reserves (Note 1)

These are, subject to Note 1, the audited accumulated profits retained by the firm (after deduction of tax, dividends and proprietors' or partners' drawings) and other reserves created by appropriations of share premiums and similar realised appropriations. Reserves also include gifts of capital, for example, from a parent undertaking.

For the purposes of calculating capital resources, a firm must make the following adjustments to its reserves, where appropriate:

(1)

a firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on debt instruments held, or formerly held, in the available-for-sale financial assets category;

(2)

a firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on cash flow hedges of financial instruments measured at cost or amortised cost;

(3)

in respect of a defined benefit occupational pension scheme:

(a)

a firm must derecognise any defined benefit asset;

(b)

a firm may substitute for a defined benefit liability the firm's deficit reduction amount, provided that the election is applied consistently in respect of any one financial year.

Interim net profits (Note 1)

If a firm seeks to include interim net profits in the calculation of its capital resources, the profits have, subject to Note 1, to be verified by the firm's external auditor, net of tax, anticipated dividends or proprietors' drawings and other appropriations.

Revaluation reserves

General/ collective provisions (Note 1)

These are provisions that a firm carrying on home financing or home finance administration holds against potential losses that have not yet been identified but which experience indicates are present in the firm's portfolio of assets. Such provisions must be freely available to meet these unidentified losses wherever they arise. Subject to Note 1, general/collective provisions must be verified by external auditors and disclosed in the firm's annual report and accounts.

Subordinated loans

Subordinated loans must be included in capital on the basis of the provisions in this chapter that apply to subordinated loans.

Note:

Reserves must be audited and interim net profits, general and collective provisions must be verified by the firm's external auditor unless the firm is exempt from the provisions of Part VII of the Companies Act 1985 (section 249A (Exemptions from audit)) or, where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts.

01/04/2013

MIPRU 4.4.3

A firm should keep a record of and be ready to explain to its supervisory contacts in the appropriate regulator the reasons for any difference between the deficit reduction amount and any commitment the firm has made in any public document to provide funding in respect of a defined benefit occupational pension scheme.

01/04/2013

MIPRU 4.4.4

Table: Items which must be deducted from capital resources

Investments in own shares

Intangible assets (Note 1)

Interim net losses (Note 2)

Excess of drawings over profits for a sole trader or a partnership (Note 2)

Notes

Notes 1. Intangible assets are the full balance sheet value of goodwill (but not until 14 January 2008 - see transitional provision 1), capitalised development costs, brand names, trademarks and similar rights and licences.
2. The interim net losses in row 3, and the excess of drawings in row 4, are in relation to the period following the date as at which the capital resources are being computed.

01/04/2013

Personal assets

MIPRU 4.4.5

In relation to a sole trader's firm or a firm which is a partnership, the sole trader or a partner in the firm may use personal assets to meet the general solvency requirement and the general capital resource requirement, to the extent necessary to make up any shortfall in meeting those requirements, unless:

(1) those assets are needed to meet other liabilities arising from:

(a) personal activities; or
(b) another business activity not regulated by the appropriate regulator; or

(2) the firm holds client money or other client assets.

01/04/2013

MIPRU 4.4.6

A sole trader or a partner may use any personal assets, including property, to meet the capital requirements of this chapter, but only to the extent necessary to make up a shortfall.

01/04/2013

Subordinated loans

MIPRU 4.4.7

A subordinated debt must not form part of the capital resources of the firm unless it meets the following conditions:

(1) (for a firm which carries on insurance mediation activity, home finance mediation activity (or both) but not home financing or home finance administration ) it has an original maturity of:

(a) at least two years; or
(b) it is subject to two years' notice of repayment;

(2) (for all other firms) it has an original maturity of:

(a) at least five years; or
(b) it is subject to five years' notice of repayment;

(3) the claims of the subordinated creditors must rank behind those of all unsubordinated creditors;
(4) the only events of default must be non-payment of any interest or principal under the debt agreement or the winding up of the firm;
(5) the remedies available to the subordinated creditor in the event of non-payment or other default in respect of the subordinated debt must be limited to petitioning for the winding up of the firm or proving the debt and claiming in the liquidation of the firm;
(6) the subordinated debt must not become due and payable before its stated final maturity date except on an event of default complying with (4);
(7) the agreement and the debt are governed by the law of England and Wales, or of Scotland or of Northern Ireland;
(8) to the fullest extent permitted under the rules of the relevant jurisdiction, creditors must waive their right to set off amounts they owe the firm against subordinated amounts owed to them by the firm;
(9) the terms of the subordinated debt must be set out in a written agreement or instrument that contains terms that provide for the conditions set out in this rule; and
(10) the debt must be unsecured and fully paid up.

01/04/2013

MIPRU 4.4.8

(1) This rule applies to a firm which:

(a) carries on:

(i) insurance mediation activity; or
(ii) home finance mediation activity (or both); and

(b) in relation to those activities, holds client money or other client assets;

but is not carrying on home financing or home finance administration.
(2) In calculating its capital resources, the firm must exclude any amount by which the aggregate amount of its subordinated loans and its redeemable preference shares exceeds the amount calculated as follows:

four times (a - b - c);

where:

items 1 to 5 in the Table of items which are eligible to contribute to a firm's capital resources (see MIPRU 4.4.2 R)

the firm's redeemable preference shares; and

the amount of its intangible assets (but not goodwill until 14 January 2008 - see transitional provision 1).

01/04/2013

MIPRU 4.4.9

If a firm wishes to see an example of a subordinated loan agreement which would meet the required conditions, it should refer to the Forms page.

01/04/2013

Reversion providers: additional requirement for instalment reversions

MIPRU 4.4.10

(1) If the reversion provider agrees under the terms of an instalment reversion plan to pay the reversion occupier for the qualifying interest in land over a period of time, then the provider must:

(a) take out and maintain adequate insurance from an insurance undertaking authorised in the EEA or a person of equivalent status in:

(i) a Zone A country; or
(ii) the Channel Islands, Gibraltar, Bermuda or the Isle of Man; or

(b) enter into a written agreement with a credit institution;

to meet these obligations in the event that the reversion provider is unable to do so.
(2) This rule does not apply if:

(a) the instalment reversion plan is linked to an investment and it is reasonably anticipated that the amounts due to the reversion occupier under the plan will be paid out of the proceeds of the investment to the occupier by a product provider other than the reversion provider; or
(b) the reversion provider acquires its interest in the property in steps proportionate to the instalments paid.

01/04/2013

MIPRU 4.4.11

The additional requirement for reversion providers aims to protect the reversion occupier against the insolvency of the reversion provider where the reversion occupier has agreed to receive the price for the part of the qualifying interest in land sold in instalments rather than in a lump sum. The requirement does not arise, for example, in relation to reversions linked to annuities as the reversion occupier has no credit risk on the reversion provider. Also, the requirement does not arise in relation to 'mini-reversions' (or 'staged reversions') as under these plans the reversion occupier continues to own the qualifying interest in land.

01/04/2013

Regulated sale and rent back agreements: additional requirement

MIPRU 4.4.12

If a SRB agreement provider agrees, under the terms of a regulated sale and rent back agreement, to account to the SRB agreement seller for any monetary sum, whether after a qualifying period, over a period of time, on the occurrence of a contingent event or otherwise, the provider must:

(1) take out and maintain adequate insurance from an insurance undertaking authorised in the EEA or a person of equivalent status in:

(a) a Zone A country; or
(b) the Channel Islands, Gibraltar, Bermuda, or the Isle of Man; or

(2) enter into a written agreement with a credit institution;

to meet these obligations in the event that the SRB agreement provider is unable to do so.

01/04/2013

MIPRU 4.4.13

An example of where this additional requirement would apply would be a term of a regulated sale and rent back agreement under which the SRB agreement seller was to receive from the SRB agreement provider a refund of an agreed percentage of the discount on the sale price of the property to which the agreement relates after an agreed qualifying period.

01/04/2013