Hi, I have a few outstanding issues from the course notes and hope that someone may be able to provide some clarity: Chapter 2 P18 – Lloyds annual venture allows investor to provide capital a year at time Is the capital not trapped for a 3-year period before RITC? P23 – Need to maintain chain of security means almost all RITCs carried out by Lloyd’s syndicates Don’t understand how RITC relates to either PTF, FAL or central assets? Chapter 3 P3 – Tax-resident company subject to corporation tax on its worldwide profits, but may have the option to elect not to be taxed on profits of foreign ‘permanent establishments’ Why would a company not do this? Is this a trade-off between paying domestic tax on profits vs. the permanent foreign tax? P10 – Companies relieving trading losses… surrendered to other companies in same regional tax group, offset by those companies against their taxable profits Not clear on the context of this transfer – would this be transfer to a subsidiary in a group? P15 – Supply of insurance outside EU outside scope of VAT so although business does not have to charge VAT, it is entitled to recover VAT input tax So insurer can claim VAT on costs it incurs but doesn’t have to charge VAT on its products? P15 – IPT is a tax on consumption collected by insurer Does this mean a tax only on party purchasing insurance, collected by insurer, and paid to HMRC? Chapter 4 P21 – S2 Premium provisions - BE premium provisions equal to best estimate of future cashflows wrt. Unexpired exposures vs. unearned proportion of written premiums Unsure how the two options differ? P21 – Need contract boundary when calculating TP Not clear on the workings on the contract boundary? The text describes it as the point premiums can be recognised – what does this mean - would this be recognition in the sfcr? P22 – Legal obligations for unincepted contracts Again, not entirely sure on context here. Do we have to hold TP’s for these contracts or not? P42 – Lloyd’s capital requirements… Lloyds SCR covers members risks & additional risks Society of Lloyd’s exposed to... PRA solvency test applied to aggregate of all members’ exposures. Assets available to meet test are FAL & central assets What are the Society of Lloyd’s risks? Are these property risk of building etc. or related to central fund? So, the PRA are deriving a SCR that is sufficient for a 1-in-200 event across the Lloyds market? P45 - Lloyd’s CSCR vs. MWSCR Again, unclear on context here – is MWSCR the capital requirement from the PRA solvency test described above? What does the CSCR covering central fund losses only mean? P45 – Members solvency deficits / surpluses counted against / in favour of members FAL Member has different surplus & deficits on different syndicates thus use the aggregate position across all interests? P48 – SAO Completion of SAO template – includes earned margin between signing actuary estimate & booked estimate… The test is described as one-sided – does this template not contradict this? Chapter 9 P14 – Aggregation of contracts How would this work in practice? I am trying to think how the examiners would ask a question on this… How would it relate to a financial statement or P&L? P14 – Estimates of future cashflows in GMM How does this contract boundary helps estimate future cashflows? Again trying to think how examiners would ask about this in context of an accounting question
Effectively, yes. It's provided a year at a time, but is held in the PTF for the 3 years, for each YoA. RITC is just the process of transferring to the next syndicate-year (normally). The funds are all still lying around in various places, but the responsibility for dealing with them transfers to somebody else. Yes, that could be one reason. There may be other reasons too, depending on the tax regime of the countries in question (don't forget that this chapter is not meant to be UK specific). Yes, it could well be. That's how I read it, yes. The tax is levied on the insurer, but they all choose to pass this on to the policyholder. Interestingly, when IPT was introduced many years ago, many insurers chose to stomach the cost themselves and not pass this on to p/h. That didn't last long This is the same argument as why URR is not the same as UPR. We need BE cashflows, not simply taking a proportion of WP. Suggest you look at the exam question in SA3 Sept 2017, this might help understand the topic more fully. Good question! Not sure of specific examples but I interpret it to mean anything that could imperil the central fund or other Lloyd's assets. Maybe there's somebody who works centrally at Lloyd's that can shed more light for us. yes, the two SCR calcs here are minima when considering members losses only (CSCR) or everything (MWSCR). Yes. I think this is just how the Core Reading is written. 'One way' as in they just say if adequate, but then highlight any difference in the SAO. I'm open to being corrected by somebody at Lloyd's! Difficult to anticipate, as there haven't been any questions on this so far. There are a few GIRO webinars on the topic, but I reckon the nitty gritty detail is very unlikely to be required in the exam. Again see the exam question in 2017 for a best guess as to how this could be examined.
