GIM1070 - Legal basis of insurance: regulatory definition of “insurance business"

Under FSMA 2000 the Financial Services Authority (FSA) has established a regulatory framework for insurance business. Under the FSA’s Integrated Prudential Sourcebook (PRU) an insurer must not carry out any commercial business other than “insurance business” and activities directly arising from that business (PRU 7.6.13). The FSA Handbook’s Glossary defines an “insurance business” as “the business of effecting or carrying out contracts of insurance“.

“Contracts of insurance” are in turn defined in the FSMA 2000 (Regulated Activities) Order 2001 (SI2001/544) in terms that derive from the European Insurance Directives (see GIM2020 and GIM3030).

There are some types of business which are on the fringes of insurance (e.g. customs bonds) and some which are not insurance at all (e.g. pension fund management). In practice, however, it will seldom be relevant to the corporation tax liability of an insurance company that some of its activities may not strictly be insurance, at least where the company is regulated in a territory where regulation is taken seriously.