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This section provides guidance on what to consider when identifying the locations of risk for regulatory and tax purposes.
Risk locations determine the territories whose laws, regulations and tax rules apply to an insurance contract. The general principles set out in this guidance should be used in conjunction with country specific information on Crystal.
Failure to identify the correct territories for regulatory and tax purposes may lead to:
All parties in the placement chain should comply with regulatory and tax obligations
No. It is possible for the territories of regulation and tax for a single contract to be different because they derive from different rules.
For instance, in the EEA the regulatory risk location for moveable property is the territory where the insured is resident but the tax risk location is where the moveable property is normally situated.
If a Canadian resident insures property outside Canada, this creates a risk location in Canada for regulatory purposes but not for tax.
Please see the country guidance on Crystal for specific risk location rules.
Yes. There are several reasons why more than one territory’s laws, regulations and tax rules may apply to a contract, including:
If the regulatory rules of more than one territory apply with contradictory effect, a common sense approach is necessary and the underwriter should ensure arrangements provide appropriate protection to the insured.
If the contract is subject to more than one’s tax regime then taxes should be paid in accordance with each territory’s rules.
It is necessary to allocate premium in relation to global contracts where multiple risks are located in more than one territory.
Please use the Risk locator tool to identify the country(s) of risk before allocating premiums. Allocating premium ensures that business is correctly reported to regulatory authorities and taxes and other fiscal charges are paid correctly. It is important that the apportionment methodology used to allocate premium is evidenced inthe documentation as regulators and tax authorities may request to see and potentially question the method used. Methods of premium apportionmentThere are no specific rules covering premium apportionment. The method used for any particular contract should be justifiable and documented.
Common apportionment methodologies used to allocate premium include:
Underwriters should adopt a common sense approach to premium allocation and apportionment. Determining premium is in principle a commercial judgment. Consequently if an underwriter decides not to take into account a minor exposure in a particular country, as to do so would not be economic, it is reasonable that no premium is allocated to that country. However the underwriter must be in a position to justify why they have not charged a premium for a particular risk.
The Risk Location Guidance should be used in conjunction with the territory specific risk location information on Crystal.
Crystal search: Step 1 - select the relevant territoryStep 2 - select ‘Pre-placement considerations’ categoryStep 3 - select ‘Definition of risk location’ sub category Step 4 - click on ‘Create a tailored search’ to view the informationFor further information about how to use Crystal please refer to the Crystal Demo and Crystal Assist (market participants will need to log into their lloyds.com account in order to access Crystal assist).
To help establish risk location please consider the questions provided via the link below
How to establish the risk location
To help you establish the risk location please consider the class of business
Class of business guidance
The interaction of different territorial rules can make a given scenario complex. Applying the principles set out will assist market participants in establishing the risk location.
Risk location examples
Lloyd's International Trading Advice(LITA) Lloyd's Desk,Ground Floor,Underwriting Room
t: +44 (0)20 7327 6677e: LITA@lloyds.com
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