Syndicate accounts: reinsurance to close (RITC): the effect of annual accounting
The RITC remains a feature of Lloyd’s and is likely to do so while the annual venture concept exists and each year’s syndicate is a separate legal entity.
Before annual accounting, the RITC was an expense in the underwriting account of the syndicate for the closing year and a receipt (not an opening provision) in the underwriting account of the following year’s syndicate.
Run-off syndicates are required to make an estimate of future liabilities (see LLM2070), that is, a provision, and revisit it every year until they are able to pay an RITC.
A single member corporate syndicate cannot technically pay a reinsurance premium to itself. Lloyd’s rules deem the provision for known and unknown liabilities of a closing year of account to be an RITC.
The annual account balance sheet will show a provision for future liabilities, part of which represents those liabilities assumed under an RITC. The amount of the RITC received and paid will be shown in the syndicate underwriting year accounts (LLM2210).