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HMRC internal manual

General Insurance Manual

Accounting framework: annual accounting: provision for costs of running-off business

FRS 3 (Reporting Financial Performance) has effect where a decision has been taken to cease underwriting a discrete segment of an insurer’s business.

The 2005 ABI SORP requires provision to be made for the full amount of costs of running-off this business in the year in which the decision to cease writing new business is made. In this case the costs are not spread forward to future accounting periods. In this situation, too, the closure provision is discounted to reflect the expected delay in paying claims.