LLD 15.4 Risk groups for general insurance business
The Society must for the purposes of reporting under this chapter:
- (1)
classify the direct and facultive general insurance business of members according to appropriate risk groups; and
- (2)
where the risks are material, complete a separate Form 34 in LLD 15 Annex 1 R for each group.
The Society must not include:
- (1)
policies falling within classes 14, 15, 16, 17 or 18 within the same risk group as policies falling within any other class, except that policies falling within class 14 may be included in the same risk group as policies falling within class 15; or
- (2)
policies in respect of private motor car risks, within the same risk group as policies in respect of other risks falling within accounting class 2 as set out in LLD 15 Annex 6 R; or
- (3)
policies in respect of comprehensive private motor car risks, within the same risk group as policies in respect of non-comprehensive private motor car risks; or
- (4)
policies transferred to members by way of a transfer under section 111 of the Act (Sanction of the court for business transfer schemes), within the same risk group as other policies.
In assessing what are appropriate risk groups for reporting purposes the Society should ensure where possible that:
- (1)
each risk group should include only risks from within a single accounting class and in relation to a single country;
- (2)
policies are not included in the same risk group where, having regard to the patterns of risk, claims incurrence and settlement patterns, it is necessary to group them separately for the purposes of applying statistical methods in calculating the provision for claims outstanding in accordance with generally accepted accounting practice; and
- (3)
claims-made policies are not included in the same risk group as policies which are not claims-made policies, except:
Subject to LLD 15.4.2 R (1) and LLD 15.4.2 R (2) and LLD 15.4.3 G (3), the Society may in respect of any accounting class include all insurance business carried on by members in any country in any financial year as a single risk group.
Notwithstanding the provisions of LLD 15.4.2 R (1) and LLD 15.4.2 R (2) and LLD 15.4.3 G (3), the Society may classify all insurance business carried on by members in any country in respect of any accounting class in any financial year as a single risk group, as long as gross premiums written for that year in respect of that insurance business are less than 5% of the world-wide gross premiums written for all accounting classes for that year.
The requirements to report a separate risk group in LLD 15.4.2 R (1) do not apply where, in the case of any financial year, the gross premiums receivable for that year in respect of that risk group would be less than £1million.
The Society must give the FSA notice of proposed changes to the definition or classification of the risk groups in LLD 15.4.1 R, sufficient to allow the FSA properly to assess the implications of the proposals.