BKM207550 - Bank compensation restriction: definition of banking company: excluded companies - insurance

CTA09/S133F(2)(a)&(b) & 2A

Insurance companies, insurance special purpose vehicles and certain members of insurance groups are excluded companies in a chargeable accounting period if they meet certain criteria. The criteria to follow depends on the regulation in force at the date of the relevant conduct.

From 1 January 2021 onwards a company who carries on the activity of effecting or carrying out contracts of insurance was an insurance company if:

  • The company has permission under Part 4A of FSMA 2000 to carry on that activity.

Between 1 December 2001 and 31 December 2020 a company who carries on the activity of effecting or carrying out contracts of insurance was an insurance company if:

  • The company has permission under Part 4A of FSMA 2000 to carry on that activity (Part 4 from 1 December 2001 to 31 March 2013),
  • The company is of the kind mentioned in paragraph 5(d) or (da) of Schedule 3 FSMA 2000 (EEA passport rights) and carries on that activity in the UK through a permanent establishment
  • The company qualifies for authorisation under Schedule 4 FSMA 2000 (Treaty rights) and carries on that activity in the UK through a permanent establishment.

Before 1 December 2001 a company who carries on the activity of effecting or carrying out contracts of insurance is an insurance company if:

  • The company is authorised under section 3 or 4 of the Insurance Companies Act 1982, or
  • The company is an EC company within the meaning of the Insurance Companies Act 1982 which is entitled to carry on direct insurance business through a branch in the UK or to provide insurance in the UK and the entitlement arises by virtue of paragraph 1 or 8 of Schedule F to the Insurance Companies Act.

Insurance special purpose vehicle

Insurance special purpose vehicles are also excluded companies. An insurance special purpose vehicle is defined in section 139 of Finance Act 2012 as an undertaking that both:

  • assumes risks from insurance or re-insurance undertakings
  • fully funds its exposures to those risks through the proceeds of a debt issue or other financing mechanism where the repayment rights of the providers of the mechanism are subordinated to the re-insurance obligations of the undertaking.

Insurance group members

Certain companies in the same group as an insurance company or insurance special purpose vehicle are also excluded from being a banking company. A company is an excluded company if it meets all the following conditions:

  • it is a member of a group
  • its only line of business is to carry on relevant regulated activities on behalf of an insurance company or an insurance special purpose vehicle
  • the insurance company or insurance special purpose vehicle is a member of the same group

A company is also excluded if in addition to the above line of business, it carries on a second line of business other than deposit taking and:

  • the company’s activities in that line of business would not, on their own, result in it being an FCA investment firm that meets the conditions in CTA09/S133H(1B) if it only carried on this second line of business and the relevant conduct occurred on or after 1 January 2022
  • the company’s activities in that line of business would not, on their own, result in it being both an IFPRU 730K firm and a full scope IFPRU investment firm if it only carried on this second line of business and the relevant conduct occurred between 1 January 2014 and 31 December 2021
  • the company’s activities in that line of business would not, on their own, result in it being both an BIPRU 730K firm and a full scope BIPRU investment firm if it only carried on the second line of business and the relevant conduct occurred before 1 January 2014

See BKM207900 for the definition of a group used for determining if a company is an excluded company.