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HMRC internal manual

General Insurance Manual

HM Revenue & Customs
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Technical provisions: periods of account beginning on or after 1 January 2000 and ending before 19 July 2007: General Insurance Reserves (Tax) Regulations: summary of regulation 3

Regulation 3 set out rules for recalculating the ‘original provisions’ for the earlier period of account.

Rule 1: Subject to regulation 5 (GIM6350), all calculations were to be made in sterling.

Rule 2: Determined the ‘original provisions for the earlier period of account’.

Rule 3: Determined out the cost of settling liabilities to which the original provisions related.

Rule 4: Applied where the insurer entered into a reinsurance contract or a novation.

Rule 5: Discounted each liability and aggregated them to find the ‘recalculated provisions’.

Rule 6: Compared the difference between original and recalculated provisions and a ‘margin for error’.

Rule 7: Subject to the margin for error, the difference represented the ‘cumulative excess or deficiency’.

Rule 8: Compared the cumulative excess or deficiency with amounts found in ’intervening periods’.

Rule 8A: Applied where an election had been made under FA00/S107 (4).

Rule 9: Calculated interest on the result of Rule 8 to find the excess or deficiency for the period in which the calculation is made.

Rule 10: UPP and URP were excluded from the rules.