GIM1070 | Legal basis of insurance: regulatory definition of ‘insurance business’

Under FSMA 2000 the FSA has established a regulatory framework for insurance business. Under the FSA’s Prudential Sourcebook for Insurers (INSPRU) an insurer must not carry out any commercial business other than insurance business and activities directly arising from that business (INSPRU 1.5.13). The FSA Handbook’s Glossary defines insurance business as the business of effecting or carrying out contracts of insurance.

Contracts of insurance are in turn defined in the RAO (see GIM1020) in terms that derive from the European Insurance Directives (see GIM2020 and GIM3030).

There are some types of business defined in the RAO which are on the fringes of insurance (for example customs bonds) and some which are not insurance as commonly understood (for example pension fund management). In practice, however, it will seldom be relevant to the corporation tax liability of an insurance company that some of its activities may not strictly be insurance, at least where the company is regulated in a territory where there is strict enforcement.