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HMRC internal manual

General Insurance Manual

HM Revenue & Customs
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Regulatory framework: the Prudential sourcebook for insurers (INSPRU): general

INSPRU now contains the detailed prudential requirements for insurers. Its sections deal with specific insurance aspects of types of risk set out in the INSPRU chapters below.

INSPRU amplifies, and must be read in conjunction with, the requirements set out in the other sourcebooks such as PRIN and SYSC, for example INSPRU1 amplifies the requirement under PRIN4 for a firm to maintain adequate financial resources (GIM3080). Firms must hold financial resources to meet liabilities, both capital and liquidity.

INSPRU therefore requires insurers to address various types of prudential risk. This applies to UK firms. Under ‘passport’ or Treaty arrangements, EEA and other firms (notably Swiss) will be regulated by their Home State.

  • INSPRU1 deals with capital resource requirements and technical provisions (see GIM3130).
  • INSPRU2 deals with credit risk, the risk an undertaking is exposed to if a counterparty to a contract fails to perform its financial obligations.
  • INSPRU3 deals with market risk, the risk from fluctuations in value of assets or other financial parameters, including equity risk, interest rate risk, currency risk and commodity risk.
  • INSPRU4 deals with liquidity risk, the risk that the undertaking may not be able to raise liquidity (cash) quickly enough to met its needs.
  • INSPRU5 deals with operational risk management, against the risk of internal or external fraud.
  • INSPRU6 deals with group risk, reflecting the requirements of the Insurance Groups Directive, as amended, governing the treatment of related undertakings where there is an insurance undertaking present (cross sector business).
  • INSPRU7 deals with individual capital assessments. These are assessed by the undertaking and discussed and agreed with the FSA.
  • INSPRU8 contains general provisions applying INSPRU and GENPRU to Lloyd’s.
  • INSPRU9 deals with actions for damages.