LLM3320 - Reinsurance to close (RITC) and technical provisions: taxation following repeal of section 107 FA 2000: appropriate amount Regulations SI2009/1926: application to members of Lloyd바카라 사이트™s syndicates

Application to members of closed syndicates (regulation 9)

Closed syndicates are those where it has been possible to agree a reinsurance to close amount (in most case with a successor syndicate - see LLM2060). A syndicate member바카라 사이트™s allowable RITC amount for a period of account is the lesser of

  • the amount treated as a technical provision for the member (per SI2009/1926 regulation 11, as explained below), and
  • the aggregate of the member바카라 사이트™s share of the syndicate unearned premium, unexpired risks and unpaid claims provisions, calculated as though the syndicate were an open syndicate (see 바카라 사이트˜open syndicates바카라 사이트™ below).

The RITC amount for a syndicate member for a period of account to be treated as a technical provision (regulation 11) is itself the lesser of

  • the RITC share paid or given (or treated as paid or given) by the member for the underwriting year whose results are declared and being assessed, and
  • the RITC share received or treated as received by the member in respect of the same transaction.

The result of this is that the RITC is treated as a technical provision for a syndicate member subject to the Regulations only to the extent that the member features at both ends of the transaction, closing payment for year 1 and corresponding opening receipt for year 2 in respect of the liabilities transferring between the closing syndicate and its successor. To the extent the payment share cannot be matched it is an ordinary reinsurance premium paid, and to the extent the receipt share cannot be matched it is an ordinary reinsurance premium received. This principle is extended in regulation 11 (3) to include payments between connected persons, as defined in ICTA88/S839 (5) to (8).

Application to members of open syndicates (regulation 10)

The technical provisions here, as for general insurance companies, are the sum of the unearned premiums, unexpired risks and unpaid claims provisions.

An open syndicate is one that makes provisions rather than agrees reinsurance to close - see LLM2070, which refers there to 바카라 사이트˜run-off바카라 사이트™ rather than 바카라 사이트˜open바카라 사이트™ and to 바카라 사이트˜estimate for future liabilities바카라 사이트™ rather than 바카라 사이트˜provisions바카라 사이트™).

General rules and adaptations in Part 3 of SI2009/1926

Regulation 12 provides that the syndicate member바카라 사이트™s share of unpaid claims liabilities is by reference to its proportionate entitlement to participate in the syndicate바카라 사이트™s underwriting business. There is a list of specific adaptations to ensure that the rules in Part 2 of the Regulations which determine what is the appropriate amount of technical provisions for a general insurance company work in a similar fashion for Lloyd바카라 사이트™s syndicate members under Part 3. For example, the reference to 바카라 사이트˜general insurer바카라 사이트™ is replaced by one to 바카라 사이트˜syndicate바카라 사이트™ or 바카라 사이트˜managing agent바카라 사이트™ as the context requires.

It follows that the rules in regulations 5 to 8 apply to the share of unpaid claims liabilities of a member of a Lloyd바카라 사이트™s syndicate in the same way as they would apply to a general insurance company. Where condition A in regulation 5(2) is relevant - confirmation that liabilities for outstanding claims is not excessive, based on skilled person바카라 사이트™s opinion - it is to be given in relation to syndicate liabilities by the managing agent rather than by syndicate members.