Explanatory note

The amount of technical provisions stated in the accounts of a general insurer (which includes members of Lloyd’s underwriting syndicates carrying on general insurance business) for a period of account is taken into account in the calculation for tax purposes of the profits of the general insurer’s trade for that period unless that amount exceeds the appropriate amount. Where the amount stated in the accounts exceeds the appropriate amount the excess is not taken into account when computing the profits: see paragraphs 1(2) and (3) of Schedule 11 to the Finance Act 2007. These Regulations make provision specifying how the appropriate amount of a general insurer’s technical provisions is to be determined for this purpose.

Part 1 of these Regulations comprises regulation 1 which provides for the citation, commencement and effect of these Regulations and regulation 2 which provides for the interpretation of terms used in these Regulations.

Part 2 comprises regulations 3 to 8 and makes provision specifying the appropriate amount in the case of general insurers other than members of Lloyd’s underwriting syndicates.

Regulation 3 introduces Part 2.

Regulation 4 specifies that the appropriate amount of the technical provisions is the aggregate of amounts representing unearned premiums, unexpired risks and the liability of the insurer for outstanding claims made against it.

Regulation 5 provides that the amount of the liabilities of the insurer for outstanding claims is the amount stated in the insurer’s accounts provided the amount is not excessive and that this is confirmed by the insurer on the basis of an opinion from a suitably skilled person.

Regulation 6 makes provision supplementing regulation 5.

Regulation 7 deals with the case where the conditions for regulation 5 to apply are not satisfied. Where regulation 7 applies the amount of the liabilities of the insurer for outstanding claims is the best estimate of the future cash flows arising for the claims.

Regulation 8 makes further provision supplementing regulation 5 and provision supplementing regulation 7.

Part 3 comprises regulations 9 to 12 and makes provision specifying the appropriate amount in the case of members of Lloyd’s underwriting syndicates.

Regulation 9 specifies the appropriate amount of the technical provisions in the case of a member of a Lloyd’s underwriting syndicate which has succeeded in closing its accounts through the payment of a reinsurance to close premium.

Regulation 10 specifies the appropriate amount of the technical provisions in the case of a member of a Lloyd’s underwriting syndicate which remains open.

Regulation 11 makes provision specifying the how to determine the reinsurance to close amount to be treated as a technical provision for the purposes of regulation 9.

Regulation 12 makes provision modifying regulations 5 to 8 to apply those regulations to Lloyd’s syndicates for the purposes of regulations 9 and 10.

A full and final Impact Assessment has not been produced for this instrument as a negligible impact on the private or voluntary sectors is foreseen.