IPTM7780 | Personal portfolio bonds (PPB): selection rules: availability for selection: ITTOIA05/S519 and S521

Even if the terms of a policy restricts a policyholder’s ability to select property and indices to those in the permitted categories, there are certain selection rules on the availability and marketing of investment opportunities that have to be satisfied in order for the policy to escape being a PPB.

Property and indices available for selection

For a policy to escape classification as a PPB, the policyholder should only be able to select property or an index for linking that is available for selection at that time by all policyholders of the insurance company or persons acting on behalf of those policyholders. This rule applies and has to be satisfied in relation to all property and indices that may be selected by the policyholder or a person acting on his or her behalf.

The PPB legislation recognises that not all of an insurer’s policyholders may have the ability to select in all cases or that the ability to select may change as new types of policies are introduced. Accordingly the generality of the rule is narrowed to permit its application to a class or classes of policyholder rather than to the policyholder base as a whole – see IPTM7785.

Time period when property and indices are available for selection

The PPB legislation does not require the opportunity to select property or an index to be available continuously. The requirement that the opportunity to select a particular property or set of properties or index should be available to all relevant policyholders applies at the time that it is available for selection, not for the whole life of all relevant policies.

Where property has already been selected for a policy and the opportunity to select that particular property subsequently becomes no longer available, for instance because a sales promotion has expired, that would not of itself make the policy a PPB.

Limitations on investment

Limitations on investment are quite common. For instance, the management of a collective investment scheme might impose its own limitations on who may invest in the scheme, whether or not through a policy of life insurance. These could limit the number of people who may invest, set a high minimum investment or prescribe how the product is to be marketed.

So long as the limitations are objective and are not based on personal or individual criteria, the insurer should be able to meet the property selection conditions in IPTM3640 or index selection conditions in IPTM3630 when making the property or index available for selection by policyholders.

If a policyholder had any say in the limiting conditions, set either by the manager of the investment or the insurer, that would make the policy a PPB.