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Lloyd's Underwriters (Reserves)

Volume 463: debated on Wednesday 6 April 1949

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Then, there is a point, which has long been debated, as to the reserves of Lloyd's underwriters. In connection with a new system which they are introducing of dealing with these, I propose to make certain adjustments. The nature of this particular business makes the underwriter liable to very large and sudden losses, and it is of the utmost importance that sufficient reserves should be built up to meet all possible contingencies. Underwriters are precluded from carrying on business through a company, and the maintenance of this provision is I understand regarded as of importance from the point of view of their international business, which is very large. They are, therefore, in the same position as ordinary individuals, and any money put to reserve has first to pay Surtax as well as Income Tax. As individuals, however, they are also immune from Profits Tax.

Provisions are being made for the setting up of trust funds, to provide reserves available to meet future losses, and the Finance Bill will contain provisions under which contributions to such funds may—within certain limits—be allowed as a deduction in computing the surtax liabilities. Those who join such a scheme will, on the other hand, become chargeable to Profits Tax. The cost of this proposal this year will be negligible; in a full year it will cost about half a million pounds. I regard this as a necessary and desirable adjustment, so as to assure the stability of Lloyd's underwriting, and the foreign exchange income that we derive from it.