LLM3140 - Reinsurance to close (RITC) and technical provisions: section 107 FA2000: example: member increases their share of the syndicate鈥檚 business (page 2 of 4)

For member Y, the RITC breaks down as follows:

RITC paid on closing of 1997 underwriting year

RITC paid for 1997 liabilities: total 拢10M (20% of 拢50M)

  1. The 拢10M is the original provision for 1997.

RITC paid on closing of 1998 underwriting year

RITC paid for 1997 liabilities: total 拢10M (25% of 拢40M)

  1. 20% (拢8M) is the new 鈥榗losing provision鈥� for Y鈥檚 1997 liabilities.
  2. 5% (拢2M) relates to liabilities that Y took over in 1998. This is part of Y鈥檚 original provision for 1998.

RITC paid for 1998 liabilities: total 拢15M (25% of 拢60M)

  1. The 拢15M is all part of the original provision for 1998.

Summary of RITC paid for 1998

  • Y鈥檚 original provisions for 1998 will be 拢17M, items 3 and 4 above.
  • Y鈥檚 new 鈥榗losing provision鈥� for 1997 will be 拢8M, item 2 above.

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RITC paid on closing of 1999 underwriting year

RITC paid for 1997 liabilities: total 拢12M (40% of 拢30M)

  1. 20% (拢6M) is the new 鈥榗losing provision鈥� for Y鈥檚 1997 liabilities.
  2. 5% (拢1.5M) relates to liabilities that Y took over in 1998. It is part of Y鈥檚 new 鈥榗losing provision鈥� for 1998.
  3. 15% (拢4.5M) relates to liabilities that Y took over in 1999. This is part of Y鈥檚 original provision for 1999.

RITC paid for 1998 liabilities: total 拢24M (40% of 拢60M)

  1. 25% (拢15M) is the new 鈥榗losing provision鈥� for Y鈥檚 1998 liabilities.
  2. 15% (拢9M) relates to liabilities that Y took over in 1999. This is part of Y鈥檚 original provision for 1999.

RITC paid for 1999 liabilities: total 拢24M (40% of 拢60M)

  1. The 拢24M is all part of the original provision for 1999.

Summary of RITC paid for 1999

  • Y鈥檚 original provisions for 1999 will be 拢37.5M, items 7, 9 and 10 above.
  • Y鈥檚 new 鈥榗losing provision鈥� for 1998 will be 拢16.5M, items 6 and 8 above.
  • Y鈥檚 new 鈥榗losing provision鈥� for 1997 will be 拢6M, item 5 above.