GIM4250 - Taxation of general insurance: composite insurance companies

A composite insurance company carries on both long-term and general business.

By a statutory fiction, life assurance and post-1937 capital redemption business on the one hand and other insurance business on the other are treated as separate trades (ICTA88/S432 and ICTA88/S458A). Subject to this, it is highly likely that the company would be found to be carrying on a single trade, so that strictly there should be a single computation for the whole of the company's business other than life assurance business and post-1937 capital redemption business.

In practice there is no objection to companies preparing separate computations for, say, permanent health insurance, and any general insurance business which the company may conduct. However, the results of these separate computations must then be combined to determine the overall figure of profit or loss.

Section 6 Insurance Companies Act 82 prohibited the authorisation of new composite insurers, unless they were reinsurers or “healthcare composites” conducting general insurance business falling within Classes 1 and 2 (Accident and Sickness Insurance) together with any class of long term business. This is also the case under the rules in the FSA Handbook ( GIM3080). Where a company does have the two sorts of business, the FSA Handbook requires composites to follow the separate solvency requirements for each category of business.