SolvedLLM3150 | Reinsurance to close (RITC) and technical provisions: section 107 FA2000: example: member increases their share of the syndicate’s business (page 3 of 4)
From HM Revenue & Customs · Lloyd's Manual
For member Y, the claims paid break down as follows.
Claims paid in year following payment of the 1997 RITC
Claims paid for 1997 liabilities: total £5M (25% of £20M)
20% (£4M) relates to Y’s 1997 liabilities.
5% (£1M) relates to liabilities for 1997 that Y took over in 1998.
Claims paid for 1998 liabilities: total £15M (25% of £60M)
The £15M all relates to Y’s 1998 liabilities.
Summary of claims paid in year following payment of the 1997 RITC
Y paid £4M of claims for which Y had provided in 1997, item 1 above.
Y paid £16M for claims in 1998, items 2 and 3 above. These will not feature in the FA00/S107 calculations as they were paid before the end of the year for which the RITC was paid.
Claims paid in year following payment of the 1998 RITC
Claims paid for 1997 liabilities: total £4M (40% of £10M)
20% (£2M) relates to Y’s 1997 liabilities.
5% (£0.5M) relates to liabilities for 1997 liabilities that Y took over in 1998.
15% (£1.5M) relates to liabilities for 1997 that Y took over in 1999.
Claims paid for 1998 liabilities: total £8M (40% of £20M)
25% (£5M) relates to Y’s 1998 liabilities.
15% (£3M) relates to liabilities for 1998 liabilities that Y took over in 1999.
Claims paid for 1999 liabilities: total £32M (40% of £80M)
The £32M all relates to Y’s 1999 liabilities.
Summary of claims paid in year following payment of the 1998 RITC
Y paid £2M of claims for which Y had provided in 1997, item 4 above.
Y paid £5.5M of claims for which Y had provided in 1998, items 5 and 7 above.
Y paid £36.5M for claims in 1999, items 6, 8 and 9 above. These will not feature in the FA00/S107 calculations as they were paid before the end of the year for which the RITC was paid.