Instructions for completion of Forms 11 & 12
Long-term insurance business
1. For a composite firm, Forms 11 and 12 must be completed separately for the total general insurance business and for the total long-term insurance business which is class IV or supplementary accident and sickness insurance business or life protection reinsurance business written by a pure reinsurer or a mixed insurer. For other firms, the forms must be completed for the total general insurance business or for the total long-term insurance business which is class IV, or supplementary accident and sickness insurance business or life protection reinsurance business written by a pure reinsurer or a mixed insurer, as appropriate.
2. Notwithstanding instruction 1, if the gross annual office premiums for class IV business, life protection reinsurance business written by a pure reinsurer or a mixed insurer and supplementary accident and sickness insurance in force on the 'valuation date' do not exceed 1% of the gross annual office premiums in force on that date for all long-term insurance business, Forms 11 and 12 need not be completed for long term insurance business as long as it can be stated that the entry in line 21 of Form 60 exceeds the amount that would be obtained if Forms 11 and 12 were to be completed for long-term insurance business. In this circumstance, the method of estimating the entry in line 21 of Form 60, together with a statement of the gross annual office premiums in force at the 'valuation date' in respect of Class IV business, life protection reinsurance business written by a pure reinsurer or a mixed insurer and supplementary accident and sickness insurance, must be given in a supplementary note (code 6001).
3. When completing Forms 11 and 12 for long-term insurance business the accounting conventions for general insurance business should be followed, but reasonable approximations may be used if they are unlikely to result in an underestimate of the insurance health risk and life protection reinsurance capital component.
4. In the case of a marine mutual completing an abbreviated return under rule 9.36A, units must be the same as those used in Form M1. If units are in US$ or US$000, then references to the sterling equivalent of Euro in line 33 of Form 11 and lines 33 of Form 12 must be taken to be references to the US$ equivalent of the specified amount of Euro and the Forms must be amended to reflect the use of US$. The bases of conversion adopted must be stated by way of a supplementary note to Form 11 (code 1101).
5. Lines 14 and 24 of Form 11 and line 27 of Form 12 must be left blank for a pure reinsurer which became a firm in run-off before 31 December 2006 and whose Part IV permission has not susequently been varied to add back the regulated activity of effecting contracts of insurance.
Prior year figures
6. INSPRU 1.1.71R requires recalculation of the gross adjusted premiums amount and the gross adjusted claims amount (but not during financial years beginning before 31 December 2004, because of the transitional provisions) if there has been a significant change to the business portfolio. This may alter the claims amount or the premiums amount used in calculating the general insurance capital requirement for the financial year in question. For this reason, entries in column 2 (but not the brought forward amount: this should (errors excepted) equal the brought forward amount calculated in the previous year's return) may differ from the corresponding entries from the previous year. Any restatement of the figures should be explained by way of a supplementary note to Form 11 (code 1102) and Form 12 (code 1202).
Prior year figures
7. If the financial year ends after 30 December 2006, the amounts to be shown in column 2 must be the amounts shown in column 1 for the previous financial year, unless Forms 11 and 12 were not completed for the previous financial year. In that event column 2 must be left blank, apart from the amounts in 11.51.2, 11.52.2 and 12.43.2. The amounts in 11.51.2 and 12.43.2 must be calculated in accordance with the rules in force at the date to which they relate, so for a previous financial year ending prior to 31 December 2006 they must exclude life protection re insurance business.
8. Where the financial year began between 1 January 2004 and 31 December 2004 (inclusive), the previous financial year's figures would normally be those sent to the FSA under rule 9.6(1B) and may be unaudited.
9. If the financial year began before 1 January 2005:
- the treatment of "actuarial health insurance" in the calculation will have changed and prior year figures in lines 32 and 33 of Form 11 and lines 32 and 33 of Form 12 may be inappropriate because the form does not represent the calculation at the time. If so, these figures should be left blank and an explanation should be provided by way of a supplementary note to Form 11 (code 1103) and Form 12 (code 1203).
- the firm would not have had a reference period in relation to the previous financial year if it had been in existence for less than 3 or 7 financial years (as appropriate). If it had no reference period, then lines 11 to 41, column 2, of Form 12 should be left blank.
Premiums and claims
10. Premiums and claims are defined by references to contracts of insurance and these themselves are defined by the Regulated Activities Order so that premiums or claims may be included for contracts that would not be treated as insurance under normal accounting conventions. All direct and indirect costs related to the claims must be included. For life protection reinsurance business and permanent health reinsurance business the discount to the premium, during any initial period, to allow for acquisition expenses of the cedant must be ignored, i.e. an adjustment must be made to premiums written and premiums earned as if the premium is the amount excluding the discount and the discount had been accounted for as an expense.
11. The Euro amounts in the calculation of line 33 of Form 11 and line 33 of Form 12 will change from time to time as the result of indexation in accordance with INSPRU 1.1.49R. The conversion rate to be used is described in INSPRU 1.1.50R. Changes in the Euro amounts or conversion rates will not affect prior year figures.
Actuarial health insurance
12. "Actuarial health insurance" refers to health insurance business that meets the conditions of INSPRU 1.1.72R or for class IV insurance business those conditions as modified by INSPRU 1.1.86R.
Instructions for completion of Form 11
1. Line 30 represents the gross adjusted premiums amount calculated in accordance with INSPRU 1.1.56R, if the financial year has 12 months. Otherwise line 31 represents the gross adjusted premiums amount.
2. In accordance with INSPRU 1.1.54R, the reinsurance ratio calculated at line 49 must be:
- 1.00 if sub-total C is zero
- 1.00 if sub-total D / sub-total C exceeds 1.00;
- 0.50 if sub-total D / sub-total C is less than 0.50; and
- sub-total D / sub-total C, otherwise.
The ratio at line 49 must be shown to two decimal places, but the unrounded ratio must be used for calculating Form 11 line 50 and Form 12 line 41.
3. The provisions in line 51 must be net of reinsurance and must not be discounted or reduced to take account of investment income, except for:
- risks in classes 1 or 2;
- reductions to reflect the discounting of annuities; and
- a pure reinsurer that does not have permission under the Act to effect contracts of insurance.
For these exceptions, the discount must be calculated in accordance with GENPRU 1.3.4R and, if any amounts in line 51 are discounted, a supplementary note to the Form 11 (code 1104) must describe the items that are discounted.
4. Form 11 line 53 column 1 is determined as follows:
- If Form 11 line 51 columns 1 and 2 and line 52 column 2 are all zero then Form 11 line 53 column 1 equals Form 12 line 43 column 2.
- If Form 11 line 51 columns 1 and 2 are both zero but line 52 column 2 is non-zero then Form 11 line 53 column 1 equals the lesser of Form 12 line 43 column 2 and (Form 12 line 43 column 2 multiplied by the ratio of Form 11 line 52 column 1 to line 52 column 2).
- If Form 11 line 51 column 2 is zero but line 51 column 1 is non-zero then Form 11 line 53 column 1 equals Form 12 line 43 column 2.
- If Form 11 line 51 column 2 is non-zero then Form 11 line 53 column 1 equals the lesser of Form 12 line 43 column 2 and (Form 12 line 43 column 2 multiplied by the ratio of Form 11 line 51 column 1 to line 51 column 2)