Using the" Lloyd's Calculator"

- to work out adjustments under section 107 FA 2000

These notes provide a practical guide to using the "Lloyd's Allocation of claims and provisions calculator" on the "General Insurance Reserves (Tax) Regulations section of the Inland Revenue website. You can find more guidance on the application of section 107 FA 2000 and the General Insurance Reserves (Tax) Regulations in Chapter 6 of the General Insurance Manual and Chapter 3 of the Lloyd’s Manual in the “Manuals” section of this web site.

General comments

  • This calculation needs to be carried out separately for each syndicate on which the member held more than 4% of the capacity in both the year paying and the year receiving the RITC
  • Enter the accounting period for which figures of claims and provisions are required in the isolated box to the top left of the screen entitled "Calculation is for".
  • The "underwriting year" cell refers to the Lloyd's year of account declared in that year. So, the 2000 underwriting year refers to the 1997 year of account, and so on.

Calculation for 2000

Step 1 - find the original provision for 2000

  • Before doing anything else, clear any figures already shown in the matrix - these are left from earlier calculations and will interfere with your calculations if not deleted.
  • Enter "2000" in the "Calculation is for" box, and under the "2000" underwriting year enter the member's percentage participation for the 1997 year of account and the total amount of the claims paid and RITC paid by the syndicate.
  • Also enter the member's participation on the same syndicate for the 1998 year of account in the isolated box at the bottom entitled "Participation for 2001". The member's share of claims and RITC will appear in the bottom two rows. The `claims' figure will include any part of the RITC which is to be treated as a claim for the purposes of the section 107 calculation.
  • The amount of the member's share of the RITC shown as member provisions under the 2000 underwriting year is his original provision for the 2000 accounting period for the purposes of the section 107 calculation.

Calculation for 2001

Step 2 - find the cost of settling 2000 liabilities in 2001

  • Now enter "2001" in the "Calculation is for" box. The cells for the 2000 and 2001 underwriting years will become activated. Clear the figures previously entered in the 2000 column.
  • Enter the member's percentage participation for the 1997 and 1998 years of account under the 2000 and 2001 underwriting years respectively. In the isolated cell at the bottom entitled "Participation for 2002" enter the member's participation for the 1999 year of account.
  • Under the 2000 underwriting year enter that part of the claims and RITC paid by the 1998 syndicate in respect of the 1997 and prior years of account. The claims to enter here are those paid in the calendar year 2000 in respect of 1997 and prior years of account.
  • Under the 2001 underwriting year enter that part of the claims and RITC paid by the 1998 syndicate in respect of the 1998 year of account. The claims to enter here are those paid in the calendar year 2000 in respect of the 1998 year of account.
  • The member's share of claims and RITC (i.e. provisions for the purposes of the section 107 calculation) will appear in the bottom two rows.
  • The figures under the 2000 underwriting year are the claims and provisions to be entered into the section 107 calculations for the 2000 accounting period, as the cost of settling liabilities in 2001. For the section 107 calculation, these must be compared with the original provision for 2000 obtained as described under Step 1 above.

Step 3 - find the original provision for 2001

  • The amount of the member's share of the RITC shown as member provisions under the 2001 underwriting year is his original provision for 2001 accounting period for the purposes of section 107.

Calculation for 2002

Step 4 - find the cost of settling 2000 and 2001 liabilities in 2002

  • Enter 2002 in the "Calculation is for" box at the top, then enter the member's participation for the 1997, 1998 and 1999 years of account under the 2000, 2001 and 2002 Underwriting Years respectively.
  • Enter the member's participation for the 2000 year of account in the "Participation for 2003" box at the bottom.
  • Clear the figures previously entered in the 2000 and 2001 columns, and enter the syndicate claims and RITC of the 1999 year of account, divided into the amounts paid in respect of the 1997, 1998, and 1999 years of account, in columns under the 2000, 2001 and 2002 Underwriting Years respectively. The amounts appearing in the bottom two rows under the 2000 underwriting year are the figures to be entered into the section 107 calculations for 2000 as the cost of settling liabilities of 2000 in 2002. The figures under the 2001 underwriting year are the cost of settling liabilities of 2001 in 2002.

Step 5 - find the original provision for 2002

  • The amount of the member's share of the RITC shown as member provisions under the 2002 underwriting year is his original provision for the 2002 accounting period for the purposes of section 107.

Example

Let us assume that a member's participation on a syndicate increases from 20% for the 1997 underwriting year, to 25% for the 1998 underwriting year and to 40% for the 1999 underwriting year. The figures for the total amount of claims and RITC paid by the syndicate in each year are as follows

 

Underwriting year for which amounts paid

Underwriting year in which claims/RITC paid

1997

1998

1999

Claims paid for 1997

£90

£70

£20

Claims paid for 1998

N/A

£110

£40

Claims paid for 1999

N/A

N/A

£130

RITC paid for 1997

£120

£100

£60

RITC paid for 1998

N/A

£140

£80

RITC paid for 1999

N/A

N/A

£160

For 2000: enter the member's 20% participation on the 1997 year of account, and enter the syndicate's RITC of £120. You will see that the original provision for 2000 is £24. The calculator will look like this:

Calculation is for

2000

Underwriting Year

2000

Participation

20%

Syndicate Claims

90

RITC

120

Member Claims

18

Member Provisions

24

Participation for 2001

25%

The starting point for the section 107 calculations is as follows:

 
1997 YOA Original provision Claims paid Closing provision
1997 24    

For 2001: clear these figures and change the "calculation is for" box to 2001. In the columns under 2000 and 2001 respectively enter the member's 20% and 25% participations, the syndicate claims of £70 and £110, and the syndicate RITC of £100 and £140. You will see that the member's claims paid in 1998 in respect of 1997 are £14 and the member's provisions are £20. For section 107 purposes, you will need to compare the discounted sum of these two figures with the original £24 provision. You will also see that the member's original provision for 1998 paid in 1998 is £40. The calculator will look like this:

Calculation is for

2001

Underwriting Year

2000

2001

Participation

20%

25%

Syndicate Claims

70

110

RITC

100

140

Member Claims

14

31

Member Provisions

20

40

Participation for 2002

40%

The section 107 calculations therefore become:

 
1997 YOA Original provision Claims paid Closing provision
1997 24    
1998   14 20
 
1998 YOA Original provision Claims paid Closing provision
1998 40    

For 2002: clear these figures and change the "calculation is for" box to 2002. In the columns under 2002, 2001 and 2002 respectively enter the member's 20%, 25% and 40% participations. Also enter the syndicate claims figures of £20, £40 and £130 respectively. Also enter the syndicate RITC figures of £60, £80 and £160 respectively.

You will see that for 1997 the claims paid are £4 and the closing provision is £12. For 1998 the claims paid are £11 and the closing provision is £23. For 1999 the original provision is £85. The calculator will look like this:

 

Calculation is for

2002

Underwriting Year

2000

2001

2002

Participation

20%

25%

40%

Syndicate Claims

20

40

130

RITC

60

80

160

Member Claims

4

11

61

Member Provisions

12

23

85

Participation for 2003

40%

The figures to use in section 107 calculations therefore become:

 
1997 YOA Original provision Claims paid Closing provision
1997 24    
1998   14 20
1999   4 (cum 18) 12
 
1998 YOA Original provision Claims paid Closing provision
1998 40    
1999   11 23
 
1999 YOA Original provision Claims paid Closing provision
1999 85    
   
Home
    Top