FOURTH SCHEDULE
Paragraph 1(14) of First Schedule and paragraph 1 of Second Schedule
Component 2 (C2) Requirement — Investment Risks and Risks Arising from Interest Rate Sensitivity and Foreign Currency Mismatch Between Assets and Liabilities
C2 requirement
1.—(1)  Subject to paragraph 10, a registered insurer shall calculate the C2 requirement as the sum of the following:
(a)the equity investment risk requirement calculated in accordance with paragraph 2;
(b)the debt investment and duration mismatch risk requirement calculated as —
(i)the debt investment risk requirement in an increasing interest rate environment calculated in accordance with paragraph 3 and the liability adjustment requirement in an increasing interest rate environment calculated in accordance with paragraph 4; or
(ii)the debt investment risk requirement in a decreasing interest rate environment calculated in accordance with paragraph 3, and the liability adjustment requirement in a decreasing interest rate environment calculated in accordance with paragraph 4, whichever is the higher;
(c)the loan investment risk requirement calculated in accordance with paragraph 5;
(d)the property investment risk requirement calculated in accordance with paragraph 6;
(e)the foreign currency mismatch risk requirement calculated in accordance with paragraph 7;
(f)the derivative counterparty risk requirement calculated in accordance with paragraph 8; and
(g)the miscellaneous risk requirement calculated in accordance with paragraph 9.
Swap positions
(2)  A registered insurer shall deem a position in a swap as —
(a)a notional long position in a forward contract or an option, on a security or an index; and
(b)a notional short position in a forward contract or an option, on a security or an index,
such that the combined payouts arising from the two notional positions match the payouts arising from the swap exactly in terms of timing and amount.
(3)  Where the notional position referred to in sub-paragraph (2) makes reference to an interest rate instead of a specific security, the notional position shall be deemed as a position in a government debt security.
Valuation of notional positions
(4)  A registered insurer shall value a notional position in a security as the current market value of the security, except in the case of a notional position derived from a warrant or a convertible security, in which event the insurer shall value the notional position as —
(a)the sum of the current market value of the underlying share and an amount equal to any loss on conversion; or
(b)the current market value of the underlying share less an amount equal to any profit on conversion, subject to a minimum value of zero.
C2 requirement for non-standard instruments
(5)  Where a registered insurer holds a position in any security, futures contract, forward contract, foreign exchange contract or other financial asset for which no method for computation of a C2 requirement has been prescribed in this Schedule, the insurer shall —
(a)immediately consult the Authority; and
(b)until otherwise directed by the Authority —
(i)add 100% of the current market value of the position to the miscellaneous risk requirement calculated in paragraph 9; or
(ii)calculate an appropriate C2 requirement for the position in the manner that the Authority may otherwise direct.
Equity investment risk requirement
2.—(1)  In calculating the equity investment risk requirement, a registered insurer shall include —
(a)any position in an equity security, except, where the insurer elects to include in the calculation of the debt investment risk requirement under paragraph 3, any position in a collective investment scheme with a mandate to invest in debt securities and debt derivatives only;
(b)any position in an equity derivative; and
(c)any position in a convertible security that —
(i)has less than 30 days remaining to the first date on which conversion may take place; and
(ii)is trading at a premium of less than 10%, where “premium” means the excess of the current market value of the convertible security over the current market value of the underlying share, expressed as a percentage of the current market value of the underlying share.
(2)  In the calculation of the equity investment risk requirement, the insurer shall derive the position in relation to every depository receipt, warrant, convertible security or other equity derivative included —
(a)in relation to a depository receipt, a warrant, a convertible security, futures on a single stock, or a forward on a single stock, as a notional position in the underlying share;
(b)in relation to a future or a forward on a basket of shares or share index, as notional positions in the constituent shares of the basket of shares or share index;
(c)in relation to a purchased call option or a written put option, as a notional long position in the underlying share; and
(d)in relation to a purchased put option or a written call option, as a notional short position in the underlying share.
(3)  The insurer shall calculate the equity investment risk requirement as the sum of —
(a)the equity specific risk requirement calculated in accordance with sub-paragraph (4); and
(b)the equity general risk requirement calculated in accordance with sub-paragraph (5).
Equity specific risk requirement
(4)  To calculate the equity specific risk requirement, the insurer shall —
(a)calculate, for the position in each share (whether it is a long or short position), 8% of the absolute value of the current market value of the position; and
(b)calculate the equity specific risk requirement as the aggregate of the products calculated in sub-paragraph (a) for all shares.
Equity general risk requirement
(5)  To calculate the equity general risk requirement, the insurer shall —
(a)allocate the position in each share to an appropriate country or territory;
(b)calculate an overall net long or short position for each country or territory by netting the long and short positions in all shares allocated to that country or territory;
(c)calculate the equity general risk requirement for that country or territory as 8% of the absolute value of the current market value of the overall net long or short position calculated in accordance with sub-paragraph (b); and
(d)calculate the equity general risk requirement as the sum of the products calculated in sub-paragraph (c) for all countries or territories.
Adjustments for warrant or option
(6)  The insurer shall adjust the absolute value of the equity investment risk requirement arising from an option by deducting an amount equal to the extent to which the option is out-of-the-money, which is determined as —
(a)in the case of a call option, any positive excess of the value at which the option will be exercised (exercise value) over the current market value of the underlying share; and
(b)in the case of a put option, any positive excess of the current market value of the underlying share over the exercise value, but the adjusted absolute value of the equity investment risk requirement arising from the option shall not exceed the current market value of the option and in any case no less than zero.
(7)  The insurer shall restrict the absolute value of the equity investment risk requirement arising from a warrant to the current market value of the warrant.
(8)  Any adjustment made under sub-paragraphs (6) and (7) shall be made proportional to the equity specific risk requirement and equity general risk requirement arising from the warrant or option.
Interest rate add-on for equity derivatives
(9)  The insurer shall calculate a risk requirement to cover the interest rate risk in a position in an equity derivative (whether or not the equity derivative has been treated or included as an equity position or equity derivative position) by including the notional position in a debt security derived in accordance with sub-paragraph (10) in the calculation of the debt investment risk requirement.
(10)  For the purpose of sub-paragraph (9), the insurer shall derive the notional position in an appropriate debt security as follows:
(a)the notional position shall have a maturity equal to the period up to the expiry of the equity derivative contract;
(b)the notional position shall be either —
(i)a long position, in a case where the underlying equity position is a short position; or
(ii)a short position, in a case where the underlying equity position is a long position.
Debt investment risk requirement
3.—(1)  Subject to sub-paragraph (4), in calculating the debt investment risk requirement, a registered insurer shall include —
(a)any position in a debt security;
(b)any position in a debt derivative;
(c)where the insurer has made an election referred to in regulation 2(1)(a), any position in a collective investment scheme with a mandate to invest in debt securities and debt derivatives only;
(d)any non-convertible preference share;
(e)any position in a convertible security that does not meet the conditions in regulation 2(1)(c); and
(f)any notional position arising from interest rate add-on for equity derivatives derived in accordance with regulation 2(10).
(2)  In the calculation of the debt investment risk requirement, the insurer shall, subject to sub-paragraph (3), derive the position in relation to every debt derivative to be —
(a)in relation to a long (or short) futures or forward contract on a debt security, a notional long (or short) position in the underlying debt security and a notional short (or long) position in a zero coupon government debt security with a maturity equal to the time of expiry of the futures or forward contract;
(b)in relation to a futures contract on an interest rate or a forward rate agreement —
(i)where the insurer buys a futures contract on an interest rate or sells a forward rate agreement —
(A)a notional short position in a zero-coupon government debt security with a maturity equal to the period to expiry of the futures contract or the settlement date of the forward rate agreement; and
(B)a notional long position in a zero-coupon government debt security with a maturity equal to the sum of the period to expiry of the futures contract or the settlement date of the forward rate agreement and the maturity of the deposit period; and
(ii)where the insurer sells a futures contract on an interest rate or buys a forward rate agreement —
(A)a notional short position in a zero-coupon government debt security with a maturity equal to the sum of the period to expiry of the futures contract or the settlement date of the forward rate agreement and the maturity of the borrowing period; and
(B)a notional long position in a zero-coupon government debt security with a maturity equal to the period to expiry of the futures contract or the settlement date of the forward rate agreement;
(c)in relation to a purchased call option or written put option on a debt security, a notional long position in the underlying debt security;
(d)in relation to a purchased put option or written call option on a debt security, a notional short position in the underlying debt security;
(e)in relation to an option on an interest rate, a notional position in an appropriate government security —
(i)which is —
(A)a long position, in the case of a purchased call option or a written put option; or
(B)a short position, in the case of a purchased put option or written call option; and
(ii)which has a maturity equal to the sum of the period until the expiry of the option and the period for which the interest rate is fixed;
(f)in relation to an option on a futures contract or forward contract on a debt security, a notional position in the underlying futures contract or forward contract; and
(g)in relation to an option on a futures contract on an interest rate or a forward rate agreement, a notional position in the underlying futures contract or forward rate agreement.
(3)  Where it relates to a forward contract or a futures contract that allows settlement by a range of deliverable debt securities, the notional position derived according to sub-paragraph (2) shall refer to the debt security that is clearly identified as the most profitable for the party having a short position to deliver.
(4)  For any position in a collective investment scheme included in the calculation of debt investment risk requirement with a mandate to invest in debt securities and debt derivatives only, the insurer shall treat such collective investment scheme as a single debt security and apply the calculation method as set out in sub-paragraph (7) to the average maturity, coupon, credit quality of the debt securities or debt derivatives underlying the collective investment scheme.
(5)  A pair of long and short positions in the same debt security may be excluded from the calculation of debt investment risk requirement to the extent they are matched.
(6)  For the purpose of sub-paragraph (5), a pair of long and short positions is matched if —
(a)the positions are in respect of the same debt security with identical issuer, coupon, currency and residual maturity; or
(b)for notional positions with identical issuer, nominal value and currency, but different coupon or residual maturity —
(i)the notional positions arise from futures contracts and mature within 7 days of each other;
(ii)both of the notional positions arise from swaps or forward rate agreements and have identical reference rates (for floating rate positions), and the coupon rates are within 15 basis points of each other; or
(iii)both the notional positions arise from swaps, forward rate agreements or forward contracts and —
(A)where the maturity of the positions are no more than 30 days from the valuation date, the maturity of the positions are on the same day;
(B)where the maturity of the positions are more than 30 days but no more than 12 months from the valuation date, the maturity of the positions are within 7 days of each other; or
(C)where the maturity of the positions are more than a year from the valuation date, the maturity of the positions are within 30 days of each other.
(7)  An insurer shall calculate the debt investment risk requirement —
(a)in an increasing interest rate environment, as the sum of —
(i)the debt specific risk requirement calculated in accordance with sub-paragraph (9); and
(ii)the debt general risk requirement calculated in accordance with sub-paragraph (10); or
(b)in a decreasing interest rate environment, as the sum of —
(i)the debt specific risk requirement calculated in accordance with sub-paragraph (9); and
(ii)the negative of the debt general risk requirement calculated in accordance with sub-paragraph (10).
Maturity
(8)  In this Schedule, unless the context otherwise requires, “maturity” means —
(a)the period remaining till the maturity of the security; or
(b)in the case of a debt security with a floating rate coupon, the period remaining till the determination of the rate of the next coupon.
Debt specific risk requirement
(9)  For the purpose of calculating the debt specific risk requirement, the insurer shall calculate —
(a)the debt specific risk requirement for the position in each debt security (whether it is a long or short position) as the product of —
(i)the absolute value of the current market value of the position; and
(ii)the appropriate debt specific risk factor set out in Table 7 of the Sixth Schedule; and
(b)the debt specific risk requirement as the aggregate of the products calculated in sub-paragraph (a) for all securities.
Debt general risk requirement
(10)  For the purpose of calculating the debt general risk requirement, the insurer shall —
(a)group long and short positions in each debt security for all securities in the same currency to form currency portfolios;
(b)apply one of the following methods to calculate the debt general risk requirement for each currency portfolio:
(i)for an insurer who does not have any short position in any debt security, the simplified method described in sub-paragraph (11); or
(ii)the maturity method described in sub-paragraph (12); and
(c)calculate the debt general risk requirement as the sum of the requirements for each currency portfolio determined in sub-paragraph (b).
Simplified method
(11)  For the purpose of calculating the debt general risk requirement for a currency portfolio under the simplified method, the insurer shall calculate —
(a)for each position in debt securities in that currency portfolio, the product of —
(i)the market value of the position; and
(ii)the appropriate debt general risk factor set out in Table 8 of the Sixth Schedule; and
(b)the debt general risk requirement as the aggregate of the products calculated in sub-paragraph (a) for all debt positions.
Maturity method
(12)  For the purpose of calculating the debt general risk requirement for a currency portfolio under the maturity method, the insurer shall —
(a)allocate each position in debt securities in that currency portfolio into an appropriate maturity band according to the maturity and coupon of the debt securities in accordance with Table 8 of the Sixth Schedule;
(b)for each maturity band defined by Table 8 of the Sixth Schedule —
(i)calculate the aggregate of all long positions;
(ii)multiply the aggregate determined in sub-paragraph (i) by the appropriate maturity band debt general risk factor set out in Table 8 of the Sixth Schedule;
(iii)calculate the aggregate of all short positions;
(iv)multiply the aggregate determined in sub-paragraph (iii) by the appropriate maturity band debt general risk factor set out in Table 8 of the Sixth Schedule;
(v)determine the vertical disallowance of the maturity band as the product of the appropriate maturity band matching factor set out in Table 9 of the Sixth Schedule and the lower of —
(A)the product determined in sub-paragraph (ii); and
(B)the absolute value of the product determined in sub-paragraph (iv); and
(vi)calculate the sum of the products determined in sub-paragraphs (ii) and (iv);
(c)for each zone defined by Table 8 of the Sixth Schedule —
(i)calculate the aggregate of the sums determined in sub-paragraph (b)(vi) for all maturity bands within the zone where those sums are positive;
(ii)calculate the aggregate of the sums determined in sub-paragraph (b)(vi) for all maturity bands within the zone where those sums are negative;
(iii)determine the intra-zone horizontal disallowance of the zone as the product of the appropriate zone matching factor set out in Table 9 of the Sixth Schedule and the lower of —
(A)the aggregate determined in sub-paragraph (i); and
(B)the absolute value of the aggregate determined in sub-paragraph (ii); and
(iv)calculate the sum of the aggregates determined in sub-paragraphs (i) and (ii);
(d)where the product of the sum determined in sub-paragraph (c)(iv) for Zone 1 and the sum determined in sub-paragraph (c)(iv) for Zone 2 is negative —
(i)determine the adjacent-zone horizontal disallowance as the product of the appropriate adjacent zone matching factor set out in Table 9 of the Sixth Schedule and the lower of —
(A)the absolute value of the sum determined in sub-paragraph (c)(iv) for Zone 1; and
(B)the absolute value of the sum determined in sub-paragraph (c)(iv) for Zone 2; and
(ii)calculate the aggregate of the sums determined in sub-paragraph (c)(iv) for Zones 1 and 2 and —
(A)where the absolute value of the sum determined in sub-paragraph (c)(iv) for Zone 1 is greater than the absolute value of the sum determined in sub-paragraph (c)(iv) for Zone 2, this aggregate shall be allocated to Zone 1 and shall be taken to replace the sum determined in sub-paragraph (c)(iv) for that zone for the purpose of the sub-paragraphs subsequent to this sub-paragraph; or
(B)otherwise, this aggregate shall be allocated to Zone 2 and shall be taken to replace the sum determined in sub-paragraph (c)(iv) for that zone for the purpose of the sub-paragraphs subsequent to this sub-paragraph;
(e)where the product of the sum determined in sub-paragraph (c)(iv) for Zone 2 and the sum determined in sub-paragraph (c)(iv) for Zone 3 is negative —
(i)determine the adjacent-zone horizontal disallowance as the product of the appropriate adjacent zone matching factor set out in Table 9 of the Sixth Schedule and the lower of —
(A)the absolute value of the sum determined in sub-paragraph (c)(iv) for Zone 2; and
(B)the absolute value of the sum determined in sub-paragraph (c)(iv) for Zone 3; and
(ii)calculate the aggregate of the sums determined in sub-paragraph (c)(iv) for Zones 2 and 3 and —
(A)where the absolute value of the sum determined in sub-paragraph (c)(iv) for Zone 2 is greater than the absolute value of the sum determined in sub-paragraph (c)(iv) for Zone 3, this aggregate shall be allocated to Zone 2 and shall be taken to replace the sum determined in sub-paragraph (c)(iv) for that zone for the purpose of the sub-paragraphs subsequent to this sub-paragraph; or
(B)otherwise, this aggregate shall be allocated to Zone 3 and shall be taken to replace the sum determined in sub-paragraph (c)(iv) for that zone for the purpose of the sub-paragraphs subsequent to this sub-paragraph;
(f)where the product of the sum determined in sub-paragraph (c)(iv) for Zone 1 and the sum determined in sub-paragraph (c)(iv) for Zone 3 is negative, determine the cross-zone horizontal disallowance as the lower of —
(i)the absolute value of the sum determined in sub-paragraph (c)(iv) for Zone 1; and
(ii)the absolute value of the sum determined in sub-paragraph (c)(iv) for Zone 3; and
(g)calculate the debt general risk requirement as the aggregate of —
(i)the sum of all products determined in sub-paragraph (b)(ii) and (iv) for all maturity bands;
(ii)the sum of the vertical disallowances determined in sub-paragraph (b)(v) for all maturity bands;
(iii)the sum of the intra-zone horizontal disallowances determined in sub-paragraph (c)(iii) for all zones;
(iv)the sum of the adjacent-zone horizontal disallowances determined in sub-paragraphs (d)(i) and (e)(i); and
(v)the cross-zone horizontal disallowance determined in sub-paragraph (f).
Adjustments for option
(13)  The insurer shall adjust the absolute value of the debt investment risk requirement arising from an option by deducting an amount equal to the extent to which the option is out-of-the-money, which is determined as —
(a)in the case of a call option, any positive excess of the exercise value over the current market value of the underlying share; and
(b)in the case of a put option, any positive excess of the current market value of the underlying share over the exercise value, but the adjusted absolute value of the debt investment risk requirement arising from the option shall not exceed the current market value of the option and, in every case, no less than zero.
(14)  Any adjustment made under sub-paragraph (13) shall be made proportional to the debt specific risk requirement and debt general risk requirement arising from the option.
Liability adjustment requirement
4.—(1)  The liability adjustment requirement in respect of general business shall be —
(a)in an increasing interest rate environment, the difference between —
(i)the C1 requirement calculated according to paragraph 3 of the Third Schedule, adjusting the interest rate assumption upwards by an appropriate adjustment set out in Table 10 of the Sixth Schedule; and
(ii)the C1 requirement calculated according to paragraph 3 of the Third Schedule; and
(b)in a decreasing interest rate environment, the difference between —
(i)the C1 requirement calculated according to paragraph 3 of the Third Schedule, adjusting the interest rate assumption downwards (subjected to a minimum interest rate of zero) by an appropriate adjustment set out in Table 10 of the Sixth Schedule; and
(ii)the C1 requirement calculated according to paragraph 3 of the Third Schedule.
(2)  Notwithstanding sub-paragraph (1), an insurer may elect not to calculate a liability adjustment requirement for an insurance fund established and maintained in respect of general business, in which case, both the liability adjustment requirement in an increasing interest rate environment and the liability adjustment requirement in a decreasing interest rate environment shall be taken to be zero.
(3)  The liability adjustment requirement in respect of life business shall be —
(a)in an increasing interest rate environment, the difference between —
(i)the policy liability risk requirement calculated according to paragraph 4 of the Third Schedule, adjusting the interest rate assumption upwards by an appropriate adjustment set out in Table 10 of the Sixth Schedule; and
(ii)the policy liability risk requirement calculated according to paragraph 4 of the Third Schedule; and
(b)in a decreasing interest rate environment, the difference between —
(i)the policy liability risk requirement calculated according to paragraph 4 of the Third Schedule, adjusting the interest rate assumption downwards (subjected to a minimum interest rate of zero) by an appropriate adjustment set out in Table 10 of the Sixth Schedule; and
(ii)the policy liability risk requirement calculated according to paragraph 4 of the Third Schedule.
Loan investment risk requirement
5.—(1)  In calculating the loan investment risk requirement for all loans originated from the insurer, a registered insurer shall calculate —
(a)for each loan, the product of —
(i)the principal outstanding; and
(ii)8% of the appropriate counterparty risk factor set out in Table 11 of the Sixth Schedule; and
(b)the loan specific risk requirement as the aggregate of the products calculated in sub-paragraph (a) for all loans.
Acceptable collateral
(2)  For the purpose of sub-paragraph (1), the insurer may reduce the principal outstanding used in determining the loan investment risk requirement by the amount of any acceptable collateral held by the insurer and such collateral shall have a value of —
(a)in the case of cash or cash value of a policy, 100% of its value;
(b)in the case of a security issued by a government or a public authority, 95% of the current market value of the securities;
(c)in the case of a security listed on a securities exchange, 70% of the current market value of the securities; and
(d)in any other case, zero.
Property investment risk requirement
6.  A registered insurer shall calculate the property investment risk requirement as 16% of the total value of all the immovable properties of the insurer.
Foreign currency mismatch risk requirement
7.—(1)  A registered insurer shall calculate for each currency (other than for the Singapore Dollar) the net open position of the insurer in the currency as the absolute value of the aggregate of the following:
(a)the amount of all assets less all liabilities denominated in the currency;
(b)the aggregate of amounts in the currency to be received by the insurer less the aggregate of amounts in the currency to be paid by the insurer in relation to the currency positions arising from any futures contract or forward contract, including a forward contract associated with cross-currency swaps or other derivatives; and
(c)net positions in products denominated in the currency in relation to any non-currency futures contract, forward contract and other derivatives, excluding —
(i)any asset or exposure for which the insurer has calculated a risk requirement equal to 100% of the value of the asset or the full contract value, as appropriate, under this Schedule; and
(ii)any position the insurer holds to hedge against a foreign currency position referred to in sub-paragraph (i), where the hedging contract is clearly earmarked as a hedge, to the extent that the nominal amount underlying each hedging contract matches the nominal amount of the contract being hedged.
(2)  The insurer shall convert its net open position in each currency to the Singapore Dollar (preserving the sign) at the prevailing market spot rate at valuation date.
(3)  The insurer shall calculate its foreign currency risk exposure as the higher of —
(a)the aggregate of net open positions of the insurer in currencies which net open position is positive; or
(b)the absolute value of the aggregate of net open positions of the insurer in currencies which net open position is negative, less 10% of the total value of assets in the insurance fund, subject to a minimum of zero.
(4)  A registered insurer shall calculate the foreign currency mismatching risk requirement as —
(a)for any insurance fund that the insurer establishes and maintains in respect of Singapore policies, 8% of the foreign currency risk exposure of the fund calculated in sub-paragraph (3); and
(b)in any other case, zero.
(5)  In the calculation of the net open positions of the insurer in currencies, the insurer shall derive the position in relation to every derivative to be —
(a)in relation to a purchased call option or a written put option, a long position in the commodity currency and a short position in the term currency, each of an amount equivalent to the notional face value of the underlying contract;
(b)in relation to a purchased put option or a written call option, a short position in the commodity currency and a long position in the term currency, each of an amount equivalent to the notional face value of the underlying contract; and
(c)in relation to a futures contract or forward contract, two notional positions, being —
(i)a long position in the commodity currency of an amount equivalent to the notional value of the underlying contract; and
(ii)a short position in the term currency of an amount equivalent to the notional value of the underlying contract.
(6)  For avoidance of doubt, positions in gold shall be deemed as positions in a separate foreign currency.
Derivative counterparty risk requirement
8.—(1)  A registered insurer shall calculate a counterparty exposure for any over-the-counter derivatives contract (other than an option written by the insurer) or derivatives contract traded on an exchange which is dependent on the issuer for performance of the contract as the credit equivalent amount of the contract.
(2)  The insurer shall calculate the derivative counterparty risk requirement as the aggregate of the products of —
(a)the counterparty exposure calculated in accordance with sub-paragraph (1); and
(b)8% of the appropriate counterparty risk factor set out in Table 11 of the Sixth Schedule, for all contracts where the derivative counterparty risk requirement is applicable.
(3)  The counterparty exposure calculated may be reduced in determining the derivative counterparty risk requirement by the amount of any acceptable collateral held by the insurer in accordance with regulation 5(2).
(4)  In this paragraph —
“credit equivalent amount” of a contract means —
(a)in the case of an over-the-counter foreign exchange contract with an original maturity of 14 days or less, zero; or
(b)in any other case —
(i)if the replacement cost of the contract is positive, the sum of the replacement cost of the contract and the potential credit exposure of the contract; or
(ii)if the replacement cost of the contract is negative, the potential credit exposure;
“potential credit exposure” means the product of —
(a)the nominal or notional principal underlying the contract; and
(b)the relevant credit exposure factor as prescribed in Table 12 of the Sixth Schedule; and
“replacement cost of the contract” means the current market value of the contract.
Miscellaneous risk requirement
9.—(1)  A registered insurer shall calculate, for each asset for which no equity investment risk requirement, debt investment risk requirement, loan investment risk requirement or property investment risk requirement has been calculated other than cash, the miscellaneous risk requirement as the aggregate of the products of —
(a)the value of the asset; and
(b)the appropriate risk factor set out in Table 13 of the Sixth Schedule.
(2)  The insurer shall add to the miscellaneous risk requirement calculated in sub-paragraph (1) an appropriate proportion of its contingent liabilities set out in Table 13 of the Sixth Schedule.
Alternative method of calculating C2 requirement
10.  A registered insurer may use any alternative method to calculate the C2 requirement if the method results in a C2 requirement which is no less than that determined in the manner provided in this Schedule, and in such a case, the Authority may require the insurer to provide documentary evidence of that fact.