French Insurance Code
In forceThe provision for liquidity risk is established when the investments referred to in Article R. 343-10, with the exception of depreciable securities which the insurance undertaking has the capacity and intention to hold to maturity, are in a situation of overall net unrealised loss. An overall net unrealised loss is recorded when the net book value of these investments is higher than the overall value of these same investments valued as follows:
a) For listed securities and the listed securities mentioned in a of article R. 343-11, the value used is the average price calculated over the last thirty days prior to the inventory date or, failing this, the last price quoted prior to this date;
b) For shares in open-ended investment companies and units in unit trusts mentioned in c) of article R. 343-11, the value used is the average of the published redemption prices over the last thirty days prior to the valuation date or, failing this, the last published redemption price prior to that date;
c) The value of other assets is valued in accordance with the rules set out in article R. 343-11.
The annual allocation to the provision for liquidity risk in respect of the financial year is equal to one third of the amount of the overall net unrealised loss recorded on the investments mentioned in the first paragraph, provided that this allocation does not result in the total amount of the provision entered in the balance sheet in respect of the financial year exceeding the amount of the overall net loss recorded on these investments.
For the purposes of the calculations referred to in the preceding paragraphs, the values referred to in a, b and c take into account unrealised gains and losses on transactions in forward financial instruments underlying the assets referred to in the first paragraph. Unrealised losses are taken into account to the extent that they exceed the value of the securities or cash pledged as collateral.
