(1) The Regulated Activities Order is amended as follows.

(2) After article 12A (information society services and managers of UCITS and AIFs) [Article 21A was inserted by S.I. 2002/1776.] insert -

"12B. Transformer vehicles: insurance risk transformation

A transformer vehicle ["Transformer vehicle" is defined in section 284A(1) of FSMA.] does not carry on an activity of a kind specified by article 10 by assuming a risk from an undertaking, provided the assumption of the risk is a specified kind of activity falling within article 13A (transformer vehicles: insurance risk transformation). [A transformer vehicle carrying on the activity specified in article 13A of the Regulated Activities Order is not a reinsurance undertaking for the purposes of the Solvency 2 Directive and does not require authorisation in accordance with Article 14 of that Directive.]".

(3) After article 13 (application of sections 327 and 332 of FSMA) insert -

"Chapter 3A Insurance risk transformation

13A. Transformer vehicles: insurance risk transformation

It is a specified kind of activity for a transformer vehicle to assume a risk from an undertaking where -

(a) the undertaking assumes a risk under a contract of insurance ("the underlying risk"); and