»Ê¹ÚÌåÓýapp

Where the member’s share of business increases (say from 20% to 25%) it seems straightforward that the original provisions were only 20% of the syndicate’s total. But where the member’s share of business reduces (say from 25% to 20%) the original provision is still only 20% of the syndicate’s business. »Ê¹ÚÌåÓýapp other 5% is payment of claims of the earlier year, and not a provision.

This brings out how the ’lesser of� rule in regulation 7(1) described at LLM3080 operated. As outlined at LLM3050, where a member reduces their share of the syndicate’s business, part of the RITC premium paid will be paid to a third party. This part therefore represents not a provision, but the cost of settling liabilities. It was therefore treated as such for the purposes of the calculation required by FA00/S107.

Example

Year of account	Liabilities for	RITC paid	Claims paid
1997	1997	£50²Ñ	-
Ìý	Ìý	Ìý	Ìý
Z has 40% share	£20²Ñ	-	Ìý
Ìý	Ìý	Ìý	Ìý
1998	1997	£40²Ñ	£20²Ñ
Ìý	1998	£60²Ñ	£60²Ñ
Ìý	total	£100²Ñ	£80²Ñ
Ìý	Ìý	Ìý	Ìý
Z has 25% share	£25²Ñ	£20²Ñ	Ìý
Ìý	Ìý	Ìý	Ìý
1999	1997	£30²Ñ	£10²Ñ
Ìý	1998	£60²Ñ	£20²Ñ
Ìý	1999	£60²Ñ	£80²Ñ
Ìý	total	£150²Ñ	£110²Ñ
Ìý	Ìý	Ìý	Ìý
Z has 20% share	£30²Ñ	£22²Ñ	Ìý

»Ê¹ÚÌåÓýapp RITC premium for 1997 would actually be paid at 31 December 1999 and claims against it would be paid in year ended 31 December 2000.

»Ê¹ÚÌåÓýapp figures for the FA00/S107 calculations are at LLM3180 to LLM3200.