PART XII SPECIAL CLASSES OF COMPANIES AND BUSINESSES

CHAPTER I INSURANCE COMPANIES, UNDERWRITERS AND CAPITAL REDEMPTION BUSINESS

Separation of different categories of business

F1432YALong-term business other than life assurance business — adjustment consequent on change in Insurance Prudential Sourcebook

(1)

This section applies in the case of—

(a)

a company which is a non-profit company, or

(b)

the non-profit fund of a company which is not a non-profit company,

if an amount (other than nil) is shown in paragraph 4(12) of Appendix 9.4 to the periodical return for the company for the first period of account which ends on or after 31st December 2006.

(2)

In computing profits of long-term business which is not life assurance business in accordance with the provisions applicable to Case I of Schedule D an amount (“the relevant amount”) shall be added—

(a)

to the closing long term business provision of the company for the first period of account which ends on or after 31st December 2006, and

(b)

to the opening long term business provision of the company for the next period of account.

(3)

The relevant amount is, subject to subsection (4), the amount by which B exceeds A. Here—

  • A is the company's long term business provision in respect of business which is not life assurance business for the first period of account which ends on or after 31st December 2006, calculated after taking into account the company's ability to—

    1. (a)

      make provision for non-attributable expenses by reference to a homogeneous risk group instead of by reference to individual policies or contracts;

    2. (b)

      make provision for the voluntary discontinuance of policies or contracts using a prudent lapse rate assumption; and

    3. (c)

      set negative liabilities against positive liabilities (subject to overall liabilities not being less than nil);

    in accordance with the Insurance Prudential Sourcebook; and

  • B is the company's long term business provision for that period of account in respect of business which is not life assurance business, calculated without taking into account the matters referred to in paragraphs (a) to (c) of the definition of A.

(4)

In a case falling within subsection (1)(b)—

(a)

the relevant amount shall be reduced (but not below nil) by so much (if any) of the amount shown in paragraph 4(12) of Appendix 9.4 to the periodical return as is reflected in column 1 of line 51 of the Form 14 for that period of account relating to the non-profit fund in question; and

(b)

the references in subsection (3) to long term business provision and to liabilities are respectively to long term business provision and to liabilities relating to the non-profit fund in question.

(5)

In this section—

“long term business provision” has the same meaning as in Schedule 9A to the Companies Act 1985;

“non-profit company” has the meaning given in section 83YA(8) of the Finance Act 1989; and

“non-profit fund” has the same meaning as in the Insurance Prudential Sourcebook.