This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

Deloitte comment letter on HM Treasury consultation on distributable profits of long-term (life) insurers

Published on: 21 Nov 2016

We have responded to HM Treasury's consultation seeking views on technical changes to the legal definition of life insurers’ distributable profits.

Overall we support the proposal to revise the calculation of distributable profits for long-term insurers.  Our key comments, which we expand on in the appendix to our comment letter are as follows:

  • We believe that in a number of instances the amounts determined based on a formula in section 843A may be higher than the amount determined under section 831. In such situations section 831 would provide a restriction for public companies capping the amount of reserves that can be distributed. We believe this operation of section 831, which stems from an EU legislation, to be a useful protective mechanism complementing the application of section 843A.
  • We believe there are potential unintended consequences from including as deductions both the amounts of illiquid or regulatory restricted assets and the amounts of capital items such as share capital and other undistributable reserves, as this may result in double counting. We ask for clarification that application of section 843A (6) would avoid double counting in such instances.
  • We recommend the development of an allocation criteria, or at least a general principle, to apportion the amount of the deductions under the new approach for items that cannot be fully allocated to the life insurance business (such as a surplus from investments in the qualifying undertakings or a defined benefit pension plan surplus).

Further comments and a full response to all questions raised in the invitation to comment are contained within the full comment letter which can be downloaded below.

Download

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.