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1. All the Forms included in the part of the return to which this Schedule relates (Forms 20 to 39) are to be laid out as shown in this Schedule, except that the instructions to Forms need not be reproduced.
2. The provisions of paragraph 1(2) and paragraphs 2 to 7 of Schedule 1 above shall, unless otherwise provided, also apply for the purposes of this Schedule.
3.—(1) Notwithstanding the provisions of paragraph 2 above, amounts on Forms 26 to 29 submitted in accordance with regulation 11 above and on Forms 31, 32 and 34 submitted in accordance with regulation 13 above in respect of business carried on in any country other than the United Kingdom shall be shown in the currency of the country concerned, except that figures shall be shown in sterling in those columns and lines which the Forms indicate are always to contain figures expressed in sterling.
(2) For every currency other than sterling in which amounts are shown on the Forms referred to in sub-paragraph (1) above an entry shall be made on Form 36 to show the rate used to convert those amounts to sterling for inclusion elsewhere in the returns.
(3) Notwithstanding the provisions of paragraph 2 above, all amounts included in—
(a)columns 1, 2, 3 and 11 of all Forms 23, 26 and 27;
(b)columns 3 and 10 of any Form 31 or 32 prepared in respect of United Kindom or home foreign business,
(c)columns 1 and 8 of any Form 34 prepared in respect of United Kingdom or home foreign business; or
shall be expressed in sterling as if conversion of every major currency had taken place at the closing middle rate on the last day for which the appropriate rate is available in the financial year in question.
(4) For the purposes of sub-paragraph (3) above, a major currency is—
(a)in the case of any business carried on in any overseas country, the currency of that country;
(b)in the case of any other business, United States dollars, Canadian dollars and any other currency which the company elects to treat as a major currency.
(5) A company need not apply sub-paragraph (3) above to amounts shown in any line of any of the Forms mentioned in that sub-paragraph representing an accident year or underwriting year ending before 23rd December 1996.
4. All amounts shown in sterling shall be shown to the nearer £1,000. Amounts in any other currency on Forms 26 to 29, 31, 32 and 34 shall be shown to the nearer 1,000 principal monetary units of that currency except that, where the rate of exchange of the currency in relation to sterling on the last day of the financial year in question exceeded 1,000 principal monetary units of that currency, the amounts shall be shown to the nearer 1,000,000 principal monetary units and the fact that this has been done shall be indicated by inserting “000,000” in the box labelled “Monetary units”. In other cases, this box shall be completed by inserting “000”.
5.—(1) Where premiums are written by a company or claims are incurred by it under a reinsurance treaty—
(a)notwithstanding paragraphs 2 to 4 above, amounts shown on Forms 26 to 29 may be shown in sterling or in United States dollars or in Canadian dollars or in an appropriately weighted average of European currencies; and
(b)if in a financial year the proportion of gross premiums written, or of claims incurred by the company or outstanding from the company, in any one currency other than sterling, United States dollars or Canadian dollars exceeds 10 per cent. of such premiums or claims under all such treaties, Forms 26 to 29 may be prepared in that currency,
and where the provisions of this sub-paragraph have been applied in respect of a reinsurance treaty in relation to a financial year, those provisions shall be applied in the same manner in respect of that treaty in relation to any later financial year.
(2) An explanation by way of supplementary note to the Forms shall be given of the method by which the said average has been determined and of any change from the manner in which Forms 26 to 29 were prepared in respect of the preceding financial year.
6.—(1) Direct insurance and facultative reinsurance business shall be included in the return in accordance with the accounting classes, save that—
(a)where a company only undertakes business in accounting class 4 in respect of risks relating to hovercraft, it may include such business in accounting class 3 if it also undertakes business in that class;
(b)a company may include in accounting class 5 business covering liability for loss of, or damage to, goods in transit which would otherwise be included in accounting class 2, provided that the policy does not cover damage to vehicles except as a related and subsidiary provision within the meaning of section 1(2) and (4) of the Act; and
(c)a company may include in accounting class 1 business falling within general business class 1(p).
(2) Non-proportional treaty reinsurance business shall be included in accounting class 9 and proportional treaty reinsurance shall be included in accounting class 10 save that—
(a)a company may include in accounting class 11 treaty business falling within general business classes 1(p), 5, 6, 7, 11 and 12; and
(b)a company shall include in accounting class 9 proportional retrocessions of non-pro portional treaty reinsurance business.
7. Where a company includes business in another accounting class under sub-paragraph (1) or (2)(a) of paragraph 6 above, the following information shall be stated by way of a supplementary note to Form 20—
(a)the nature of any business included in another accounting class pursuant to the sub-paragraph in question; and
(b)the reason for such inclusion.
8. Boxes marked “Accounting class” shall be completed so as to show the number of the accounting class. “99” shall be shown in the case of the summary account in Form 20.
9. In Forms 23, 26, 27, 31 and 32—
(a)gross premiums earned in respect of an accident year shall be such proportion of gross premiums written as is attributable to risks borne by the company during that accident year; and
(b)the reinsurers' share of premiums earned shall be attributed to the same accident years as the corresponding gross premiums earned, so as to calculate the net earned premium for each accident year.
10. In Forms 24, 25, 28, 29 and 34—
(a)gross premiums written in an underwriting year shall be the amount of such premiums arising in respect of contracts of insurance incepting during that underwriting year, whether or not they are received during that underwriting year; and
(b)the reinsurers' share of premiums written shall be attributed to the same underwriting years as the corresponding gross premiums written.
11. For the purposes of paragraphs 10 and 14 of this Schedule, where a company has acquired policies under a transfer approved by the Secretary of State under Schedule 2C to the Act(1), the policies transferred to the company shall be taken to have incepted on the date of such transfer.
12. In all Forms to which this Schedule relates, amounts required to be shown in respect of premiums shall be shown before deduction for commissions.
13.—(1) In Forms 23, 26, 27, 31 and 32, where an amount or number is required to be shown for claims in respect of an accident year, that amount or number shall be determined on the basis of claims arising from incidents occurring during that accident year.
(2) For the purposes of sub-paragraph (1) above, an incident giving rise to a claim under a claims-made policy shall be deemed to occur on the earlier of—
(a)the date on which it is notified in accordance with the terms of that policy; or
(b)the date on which the period for which cover is provided under that policy expires.
(3) For the purposes of sub-paragraph (1) above, where a company has assumed, pursuant to a contract, responsibility (whether wholly or in part) for the payment or reimbursement of claims made under policies effected by another insurance company, all incidents occurring prior to the date of such contract and giving rise to claims under those policies shall be deemed have occurred on the date of such contract.
(4) In the application of sub-paragraph (3) above, the reference to responsibility assumed by a company shall include responsibility assumed as a reinsurer or under a transfer approved by the Secretary of State under Schedule 2C to the Act; and in the case of such a transfer the date of the contract shall be taken to be the date of the transfer.
14. In Forms 24, 25, 28, 29 and 34, where an amount is required to be shown for claims in respect of an underwriting year, that amount shall be determined on the basis of claims arising under contracts of insurance incepting during that underwriting year.
15. In all Forms to which this Schedule relates, amounts required to be shown for claims shall not include amounts in respect of claims management costs.
16.—(1) For each accounting class there shall be stated separately for business accounted for on an accident year basis and on an underwriting year basis the following by way of supplementary note to Form 20—
(a)the total gross premium written and the amounts attributable to UK and to overseas business; and
(b)the reinsurers' amount in respect of each of the amounts required to be stated under sub-paragraph (a) above.
(2) For the purposes of this Schedule gross premiums written shall be shown or included as UK premiums if, in the case of direct insurance or inwards facultative reinsurance, the contract of insurance was made in the United Kingdom or if, in the case of a reinsurance treaty, the cedant was a company having its head office in the United Kingdom or was a member of Lloyd's; and “overseas premiums” shall be construed accordingly.
17.—(1) If, during the financial year, policies already effected by another insurance company have been transferred to the company, it shall state, in respect of each accounting class, the following by way of supplementary note to Form 23 and 24—
(a)the date of the transfer;
(b)whether the transfer was approved by the Secretary of State under Part II of Schedule 2C to the Act or was effected by novation;
(c)any amounts included in premiums and claims in respect of consideration for the transfer;
(d)amounts required to be stated under sub-paragraph (c) above analysed by risk group and business category;
(e)the earliest and latest dates upon which the relevant policies incept; and
(f)whether or not any of the policies has a duration of longer than 12 months and, if so, the date by which all policies will have expired.
(2) Sub-paragraph (1) above shall not apply in respect of any transfer by way of novation unless the amounts mentioned in sub-paragraph (1)(c) exceed in aggregate 2½ per cent. of the company’s gross premium income for the financial year in question.
18. In Forms 21 and 25, the basis on which unearned premiums are calculated and the reason for adopting this basis shall be stated by way of supplementary note.
19.—(1) The amount included for the provision for unexpired risks in any Form 22 or 25 prepared in respect of an accounting class or business category shall be determined without taking into account any surplus expected to arise on the unexpired risks falling within other accounting classes or business categories.
(2) Where in determining the amount of the overall provision for unexpired risks (line 13 in Form 15 less line 62 in Form 13) credit has been taken for any aggregate surplus expected to arise on the unexpired risks falling in any accounting class, the amount of that credit shall be included as a negative amount at line 19 of Form 22 for that accounting class.
20.—(1) Where the amount included at column 3 line 19 (provision for unexpired risks) in any Form 22 has been determined after taking into account expected investment return, the following shall be stated by way of supplementary note—
(a)the provision for unexpired risks before taking such investment return into account;
(b)the rates of investment return assumed; and
(c)the average interval between the end of the financial year in question and the date at which claims are expected to be settled in cash.
21.—(1) If the company has effected no new contracts of insurance of any one or more classes of general business during the financial year, the date on which the last new contract of each such class was effected shall be stated by way of supplementary note to Form 20.
(2) For the purposes of this paragraph and paragraph 22 below, a “new contract of insurance” is any contract of insurance effected by the company other than in fulfilment of its obligations under subsisting contracts of insurance.
22.—(1) In Forms 22 and 24, the basis used for the determination of amounts for claims management costs payable in the financial year in question and carried forward to the following financial year shall be stated by way of supplementary note.
(2) If, in respect of any accounting class—
(a)no amount for claims management costs is shown as being carried forward to the following financial year; and
(b)an amount for net claims is shown as being carried forward to that year,
the reason for anticipating that there will be no claims management costs incurred during the following financial years shall be included in the note required by sub-paragraph (1) above.
(3) If, within an accounting class, a company has ceased to effect new contracts of insurance during the financial year in question, the basis upon which any additional costs arising as a result of such cessation have been determined or the reason for anticipating that no such additional costs shall be incurred shall be included in the note required by sub-paragraph (1) above.
(4) Where the amount in respect of claims management costs carried forward included in any Form 22 or 24 has been determined after taking into account expected investment return, there shall be stated by way of supplementary note to that Form 22 or 24—
(a)the rates of investment return assumed; and
(b)the average interval between the end of the financial year in question and the date by which the claims management costs are expected to be expended.
23. The basis used for the determination of amounts for acquisition costs (other than commission) payable in the financial year in question and carried forward to the next financial year, as shown at line 22 of Form 22 and line 42 of Form 24, shall be stated by way of a supplementary note to those Forms.
24.—(1) With reference to the financial year in question and in respect of each accounting class, the following information shall be stated by way of supplementary note to Form 24—
(a)the reason for accounting for such business on an underwriting year basis;
(b)the basis for distinguishing between such business and any other business falling within the same accounting class accounted for on an accident year basis;
(c)the accounting policy adopted for determining the provision for claims outstanding; and
(d)if the information provided in sub-paragraphs (a) to (c) above differs in respect of risks incepted in the financial year in question from risks of a similar description incepted in previous financial years, the reason for that difference.
(2) Where the provision for claims outstanding is set in respect of any business using the non-annual method, the note required by sub-paragraph (1)(a) above shall include the following information—
(a)the reason for using the non-annual method;
(b)the basis for distinguishing between such business and other business accounted for on an underwriting year basis falling within the same accounting class;
(c)the normal period for which an underwriting year is left open or, if that period differs for different types of business within an accounting class—
(i)the basis for distinguishing between the types of business; and
(ii)the normal period for each type; and
(d)where an underwriting year is left open for longer than the normal period, the reason for not closing the year.
(3) For the purposes of this Schedule—
(a)“non-annual method” refers to the method described by paragraph 52 of the shareholder accounts rules; and
(b)“closed year” refers to a year in respect of which the provision for claims outstanding previously set under the non-annual method has been replaced in accordance with the requirements of paragraph 52(4) of the shareholder accounts rules, and “year left open” and “closing a year” shall be construed accordingly.
25.—(1) For the purposes of Forms 25 and 29, risks may be regarded as managed together if—
(a)they incept in the same financial year and are accounted for using the non-annual method; and
(b)they may be treated as managed together under generally accepted accounting practice.
(2) Where any amount is shown on Form 25 or 29 for the transfer of anticipated surplus, the following shall be stated by way of supplementary note to that Form—
(a)a description of the business in respect of which the anticipated surplus arises and of the business in respect of which the deficit to be offset arises (including in the case of Form 25 the risk groups or business categories into which such business falls); and
(b)the reason for treating the business as managed together.
26.—(1) Amounts in respect of inwards and outwards contracts of insurance shall be classified for inclusion in Forms 20 to 39 according to their economic substance in accordance with generally accepted accounting practice.
(2) Where amounts in respect of an inwards or outwards contract of insurance have been excluded from the revenue account, the following shall be shown by way of supplementary note to Form 20—
(a)a description of the terms of that contract;
(b)a description of the accounting treatment adopted and an explanation for adopting that treatment;
(c)a statement of the amounts paid and received during the financial year under that contract; and
(d)a statement of the amounts in respect of that contract included in each Form prepared under this Schedule or Schedule 1 above.
(3) A company may elect to show the information required by sub-paragraph (1) above in respect of groups of contracts which were effected in the same financial year with substantially the same contract terms and in respect of which the same accounting treatment has been adopted.
27.—(1) Sheet 2 of Form 30 need only be completed if the provision for claims outstanding being discounted (before deduction for discounting) exceeds 25 per cent. of the total provision for claims outstanding (before deduction for discounting).
(2) Where in accordance with sub-paragraph (1) above no Sheet 2 is prepared—
(a)lines 21 and 29 of Sheet 1 need not be completed; and
(b)lines 11 to 20 need only be completed in respect of those currencies for which the provision for claims outstanding being discounted (before deduction for discounting) exceeds 25 per cent. of the total provision for that currency for claims outstanding (before deduction for discounting).
(3) For the purposes of Form 30 a major currency is a currency in respect of which the provision for claims outstanding (before deduction for discounting) is not less than 10 per cent. of the total provision for claims outstanding (before deduction for discounting).
(4) In Form 30 the value of an asset or liability which would be treated as an asset or liability in a particular currency for the purposes of regulation 27 of the Insurance Companies Regulations (disregarding regulation 32(1)) shall be shown in that currency.
(5) The following shall be stated by way of supplementary note to Form 30—
(a)the risk groups and business categories where adjustments for discounting have been made; and
(b)in respect of each such risk group or business category—
(i)the methods used in calculating the deduction for discounting;
(ii)the rate of interest used for the calculation of present values;
(iii)the expected average interval between the date for settlement of claims being discounted and the end of the financial year in question; and
(iv)the criteria adopted for estimating the period that will elapse before claims are settled.
28.—(1) Where the reinsurers' share of claims incurred (as stated in Form 22 or 25) includes amounts expected to be recovered from reinsurers more than twelve months after the payment of the underlying gross claims by the company, the following shall be stated by way of supplementary note to Form 22 or 25 (as appropriate)—
(a)the amount of such recoveries; and
(b)the accounting treatment which has been adopted in respect of discounting such recoveries.
29.—(1) Subject to sub-paragraph (2) below, the name given in Forms 31, 32 and 34 to a risk group shall include a description of the risks within an accounting class included in that risk group.
(2) Where the name required by sub-paragraph (1) above is not sufficient to identify the nature of the objects exposed to such risks and the nature of the cover provided against such risks, such information shall be stated by way of supplementary note.
(3) Subject to sub-paragraph (1) above, the name given to a risk group shall remain the same when that risk group is reported in subsequent financial years.
30. Continuation sheets to Forms 31 and 34 need only be prepared in respect of accounting class 7.
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