Hi Folks, There is just a mention of Subordinated Liabilities in CMP chp 15, I have been thinking of examples: 1) Contingent Loan between internal non ring-fenced funds or external counter-parties. 2) Subordinated Debt 3) Tax on shareholder transfers? On 1) & 2) i am thinking any associated interests would not be subordinate? On 3) I am not sure if this is correct, but my thinking is long-term liabilities relating to policyholders should be "senior" to meeting tax on shareholder transfers. At worst shareholders can pay their own tax from the Shareholder Fund? Any comments/thoughts and other examples please? Thanks
Hi The interest on the contingent loan and sub debt will be paid only after policyholder liabilities and any other TCF obligations have been met (it won't just be the return of the principle, which your question implies). The tax incurred from Shareholder transfers is the result of s/hs receiving their 1/9th cost of bonus. I doubt the tax authorities would accept this being subordinate to anything. Insurers have been known to pay s/h tax from the inherited estate, which the FSA has questioned Hope that helps
