5(1)In section 82(1) of the Finance Act 1989 (c. 26) (provisions applying for purposes of computations of profits in accordance with provisions applicable to Case I of Schedule D), for “and 82B” substitute “ to 82C ”.U.K.
(2)In that Act, after section 82B insert—
(1)This section applies where—
(a)an insurance company (“the company”) enters into a contract of reinsurance which is a relevant financial reinsurance contract, and
(b)either condition A or condition B is met.
(2)A contract of reinsurance is a relevant financial reinsurance contract if, under the contract—
(a)some or all of the liabilities reinsured may cease to be reinsured (without the cedant having any right of recovery against the reinsurer), or
(b)the cedant may become liable to pay premiums wholly or partly determined (directly or indirectly) by reference to any amount which the reinsurer becomes liable to pay to the cedant under the contract.
(3)Condition A is that the reduction in the company’s liabilities resulting from the reinsurance under the relevant financial reinsurance contract is not taken into account in calculating the profits of the company.
(4)Condition B is that—
(a)an insurance business transfer scheme has effect to transfer long-term business to the company,
(b)there is a deficiency of assets on the transfer,
(c)the liabilities reinsured under the relevant financial reinsurance contract are some or all of the liabilities to policy holders and annuitants transferred,
(d)the reduction of the company’s liabilities resulting from the reinsurance of those liabilities under the relevant financial reinsurance contract occurs during the period of account in which the transfer takes place, and
(e)the whole amount of the liabilities to policy holders and annuitants transferred is not taken into account as opening liabilities in calculating the profits of the company for that period of account.
(5)For the purposes of subsection (4)(b) above there is a deficiency of assets on the transfer if—
(a)the aggregate amount of the liabilities to policy holders and annuitants, and of any debts, which are transferred, exceeds
(b)the value of the assets transferred and brought into account in the long-term insurance fund of the company.
(6)The reinsurance offset amount for each period of account of the company beginning before the termination of the relevant financial reinsurance contract is to be taken into account as a receipt of the period of account.
(7)The reinsurance offset amount for a period of account is the amount of any decrease in the period of account in the difference between the full liabilities and the reduced liabilities where—
(a)“the full liabilities” is the amount which would be brought into account for the period as liabilities but for the relevant financial reinsurance contract, and
(b)“the reduced liabilities” is the amount of the liabilities actually so brought into account.
(8)But, in a case in which condition B is met, the total amount taken into account by virtue of subsection (6) above must not exceed the amount by which—
(a)the aggregate amount mentioned in paragraph (a) of subsection (5) above, exceeds
(b)the value referred to in paragraph (b) of that subsection.
(9)For the purposes of this section “insurance business transfer scheme” includes a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State).”.
(3)Sub-paragraphs (1) and (2) have effect in relation to periods of account ending on or after 17th March 2004 (whether the insurance business transfer scheme takes place, or the relevant financial reinsurance contract is entered into, before or on or after that date).