In a recent Policy Notice the CBI gives guidance to the industry for the assessment of whether an arrangement constitutes a Ring Fenced Fund (RFF) for Solvency II. RFF classification arises as a result of a restriction (even for a limited time) on a going concern basis of own funds items so that they are not fully available to absorb losses.
All (re)insurers within the scope of Solvency II and groups supervised by the CBI are required to assess whether arrangements should be classified as a RFF. The Policy Notice sets out a non- exhaustive list of 14 criteria which should be taken into consideration as part of this assessment.
The Policy Notice provides some clarification on particular types of arrangements which may give rise to a RFF. The CBI expects with-profits funds will display the characteristics of a RFF. While conventional reinsurance is not intended to be within the scope of a RFF classification, certain reinsurance arrangements may display the characteristics of a RFF.
A link to the Policy Notice is here.