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D7.421 Reinsurance—general taxation principles

Life insurance companies routinely use reinsurance as a way to manage their exposure to risk and to reduce the need for regulatory capital.

Many companies write both direct and reinsured business but a number of companies specialise in writing reinsurance of life insurance business and write no direct business themselves, such companies are often referred to as 'pure' reinsurers.

Reinsurance is only briefly defined in the legislation as including retrocession¹ (ie the onwards reinsurance of business from the reinsurer itself) so is therefore to be given its normal meaning as understood in the insurance industry. It is also made clear that reinsurance cannot be BLAGAB unless it consists of excluded business². As a consequence reinsurance (other than excluded business) will be taxed as part of the company's non-BLAGAB business.

HMRC guidance on reinsurance can be found at LAM10000 onwards.

A regulation making power is provided to allow HMRC Commissioners