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HMRC internal manual

International Exchange of Information Manual

Financial Institutions: Specified Insurance Company

Specified Insurance Company

A Specified Insurance Company is an entity that is an insurance company, including a holding company in an insurance group, that writes products classified as Cash Value Insurance Contracts [see IEIM401640] or Annuity Contracts [see IEIM401680] or makes payments with respect to such contracts.

An insurance company that only offers general insurance or term life insurance business will not be a Specified Insurance Company and therefore will not be treated as a Financial Institution under any of the agreements for automatic exchange of information, it will instead be classified as an NFE.  The same applies to a reinsurance company that only provides indemnity reinsurance contracts.

An insurance broker that sells Cash Value Insurance or Annuity Contracts on behalf of insurance companies is part of the payment chain and will not be a Specified Insurance Company unless obliged to make payments to the Account Holder under the terms of the Cash Value Insurance Contract or Annuity Contract.

For the purposes of all of the agreements for automatic exchange of information, regulatory and business reserves, taxed as trading income, held by a General Insurance Company should be classified as active rather than passive assets, and income arising on those assets should be classified as active income [see IEIM404020].  Regulatory and business reserves include:

1) assets backing insurance liabilities, and

2) assets in excess of (1) held to meet regulatory requirements.

The same treatment, for the same reasons, applies to Lloyd’s trust entities holding regulatory and business reserves for general insurance business; these reserves should also be classified as active assets producing active income. It follows that such entities will generally be Active NFEs. This treatment is appropriate given the function of trust entities within the overall Lloyd’s structure and is consistent with how a similar business organised as a single corporate entity would be treated for the purposes of the agreements.