LLM3000 | Reinsurance to close (RITC), technical provisions and equalisation reserves: introduction

Reinsurance to close and technical provisions

GIM Chapter 6 (see LLM10000) addresses the special tax issues that relate to technical provisions of general insurance companies. Similar issues arise in relation to reinsurance to close (‘RITC’) and, for open syndicates, technical provisions for Lloyd’s syndicate members. GIM6080 explains the background to the introduction of FA00/S107 and the General Insurance Reserves (Tax) Regulations 2001, SI2001/1757. This legislation applied specific and complex tax rules to the taxation of technical provisions of a general insurer, including Lloyd’s underwriting members. These rules are described at GIM6150 to GIM6340 and the corresponding rules and adaptations for Lloyd’s members are at LLM3010 to LLM3200 in this Chapter.

LLM3210 explains a special rule that applied to RITC before the introduction of FA00/S107.

GIM6510+ explains the rules for general insurance companies following the repeal of FA00/S107 by FA07/SCH11. The corresponding rules and adaptations for Lloyd’s syndicates are at LLM3300 to 3330 below.

Equalisation reserves

FA09/S47 empowers the Treasury to make regulations extending existing equalisation relief, given to general insurance companies for the equalisation reserves they are required by the Financial services Authority to establish, so that it may also benefit corporate and partnership members of Lloyd’s who choose to establish ‘equivalent Lloyd’s reserves’. The effect of these regulations, The Lloyd’s Underwriters (Equalisation Reserves) (Tax) Regulations 2009, SI2009/2039, is described at LLM3400+. Equalisation reserves recognise the volatile and fluctuating results associated with certain general insurance business classes.