Long-term insurance businesses are subject to different rules, compared to other companies, regarding calculation of distributable profits; specifically they apply the concept of ‘long-term fund’ in Section 843 of the Companies Act 2006 (“the Act”). 

A change in the Prudential Regulation Authority (PRA) rulebook following the introduction of Solvency II (applicable to accounts for years ending on or after 1 January 2016) means that the concept of ‘long-term fund’ referenced in Section 843 is no longer used for Solvency II firms.  As a result, changes to the Act are required to allow long-term insurers to continue to apply rules regarding distributable profits that address the specific circumstances of long-term insurers and which are consistent with with the Solvency II regulatory framework. 

Comments are requested by 15 November 2016. 

The press release and the consultation document are available on the HM Treasury website.

Update 12 December 2016

Feedback from the consultation requested an updated framework for distributions of insurance companies be in place before the end of 2016.  As a result, the statutory instrument (link to statutory instrument) effecting the changes has been made and was laid before Parliament on 8 December.

The regulations come into force on 30 December 2016 and will have effect for distributions made on or after that date by reference to relevant accounts prepared for any period ending on or after 1 January 2016.