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HMRC internal manual

General Insurance Manual

Technical provisions: appropriate amount Regulations: enquiries: risk assessment

This is a technically difficult area and an enquiry should not be undertaken until the various steps set out below have been taken. While (where it has not already been supplied) it is easy to ask for the actuarial report, making sense of it and conducting in depth enquiries if preliminary enquiries are inconclusive is likely to require expert (Government Actuary) assistance. Consequently enquiries are not to be undertaken lightly.

Step 1

Unless, exceptionally, there is a particular reason to challenge the amount of provisions shown in the accounts, an enquiry should only be contemplated if the amount of provisions shown in the financial statements is identified as an ‘outlier’ by HMRC KAI Directorate. See GIM6660.

Step 2

A review will be needed of the circumstances and history of the case and its features such as its general risk profile and status (notably, whether a captive insurer, or whether there is a history of problems).

Step 3

If the main rule (GIM6610) has been applied, examine

  • who gave the confirmation, and in particular note whether it was given by an employee or consultant actuary distinct from the directors of the company
  • how much information was supplied with it, for instance an actuarial report or summary.

If the alternative rule (GIM6620) has been applied, and there is no confirmation of skilled person opinion this is itself a risk factor.

Step 4

At this stage, it is necessary to decide whether the material justifies approaching the Sector Leader to explain that it is proposed to seek further information that might result in the need to invoke the enquiry powers (GIM6540).

Step 5

If, with the agreement of the Sector Leader, it is decided to proceed, in the first instance enquiries should be pursued in advance of a formal notice (GIM6550). At this stage, evidence should be sought of how the general insurer believed it was complying with the relevant rule. Depending on how matters then develop, it may be necessary to invoke the formal enquiry powers and the procedure set out at GIM6550 to GIM6590. The outcome may depend on obtaining advice from the Government Actuary’s Department.