GIM6200 - Technical provisions: periods of account beginning on or after 1 January 2000 and ending before 19 July 2007: General Insurance Reserves (Tax) Regulations: overview of the calculation

Regulation 3 set out the detailed machinery, in the form of ten rules, by which it was determined whether or not a technical provision is excessive or insufficient, and for the calculation of the amount of 바카라 사이트榠nterest바카라 사이트� to be added to or deducted from profits. The core proposition of the rules was a comparison of:

  • the 바카라 사이트榦riginal provisions바카라 사이트�, that is the provisions for liabilities arising in a period as at the 바카라 사이트渂alance sheet date바카라 사이트� for each 바카라 사이트榚arlier period of account바카라 사이트� beginning on or after 31 December 2000, and
  • the discounted value of the 바카라 사이트榗ost바카라 사이트� of settling those provisions at a 바카라 사이트榬ecalculation date바카라 사이트�. This date was the end of a 바카라 사이트榣ater period of account바카라 사이트� ending on or after 31 December 2001. The cost of settling included claims paid in the 바카라 사이트榣ater period바카라 사이트� and the provision established as at the recalculation date in respect of the original provisions not yet settled.

The recalculation of the 바카라 사이트榦riginal provisions바카라 사이트� related to provisions which were 바카라 사이트榯aken into account바카라 사이트�. This meant taken into account for tax purposes, that is, those for which the insurer had a tax deduction (and so took account of an FA00/S107 (4) election).

The difference between the two figures, subject to a 바카라 사이트榤argin for error바카라 사이트� represented the cumulative excess or deficiency for the later period. This was adjusted for amounts accruing for previous later periods.

Thus, for an insurer in business before the introduction of the legislation and with accounts drawn up to 31 December each year, the first earlier period of account to which the rules applied was that ending on 31 December 2000. The technical provisions in the accounts for this period, and for which it had a tax deduction, were recalculated as at 31 December 2001, 31 December 2002 and so on, until the liabilities of the period ending 31 December 2000 had been run off. The first 바카라 사이트榚arlier period바카라 사이트� for any company already in business differed from later 바카라 사이트榚arlier periods바카라 사이트�. This is because the 바카라 사이트榦riginal provisions바카라 사이트� for a period ending on 31 December 2000 included not only the provisions relating to liabilities first arising in that period, but also provisions as at that date for liabilities first arising in earlier years. In subsequent 바카라 사이트榚arlier periods바카라 사이트� only the provisions for liabilities arising in the period were 바카라 사이트榦riginal provisions바카라 사이트�.

Regulation 5 of SI2003/2862 modified Rules 2 and 8 of regulation 3 to remove the 바카라 사이트榯en year rule바카라 사이트� which was a feature of the original regulations. The interaction between various aspects of the original rule would have led to some spurious and unintended results when the ten-year point was reached. In order to prevent these spurious results, the ten year roll up feature of the regulations was removed in the 2003 amendments.