The UK's tax authority, Her Majesty's Revenue and Customs (HMRC), has introduced new regulations relating to technical provisions made by general insurers, including members underwriting general insurance business at Lloyd's.
For non-Lloyd's general insurers, the rules specify the means of calculating the appropriate amount of technical provisions - based on the company's accounts - and require the insurer to give confirmation in writing that the estimated amount of liabilities in respect of claims outstanding is not an excessive estimate. This confirmation must be supported by an actuarial opinion (or an opinion of another suitably skilled person) given to the general insurer, and must reflect the circumstances prevailing at the time at which the provisions are adopted.
For Lloyd's members, the rules focus on an "allowable reinsurance to close amount" in relation to closed syndicates, which is the lesser of:
- the part of the reinsurance to close amount that is treated as a technical provision under the rules, and
- a calculation that follows the rules for non-Lloyd's insurers.
The latter calculation also applies in relation to open syndicates.
The new rules will have effect in relation to periods of account ending on or after 31 December 2009 or, for Lloyd's members, any syndicate return in respect of profits or losses declared after 31 December 2009.