Section EY 23 — Income Tax Act 2007: Reserving amounts for life insurers: non-participation policies

EY 23 Reserving amounts for life insurers: non-participation policies Reserves (1) Sections EY 24 to EY 27 apply to calculate a life insurer's reserving amounts for life insurance policies, other than annuities, that have a life risk component and that are not profit participation policies. Actuarial determination (2) All reserving amounts must be actuarially determined, for each class of policies. Positive and negative amounts: shareholder base income or shareholder base allowable deduction (3) If a reserving amount calculated under sections EY 24 to EY 27 is a positive amount, the life insurer has that amount as income included in their shareholder base income. If a reserving amount calculated under sections EY 24 to EY 27 is a negative amount, the life insurer has that amount as a deduction included in their shareholder base allowable deductions. Which reserve can be used when? (4) For an income year, for a relevant class of policies, a life insurer has a reserving amount described in— (a) section EY 24 , for outstanding claims reserves (the outstanding claims reserving amount ): (b) section EY 25 , for premium smoothing reserves (the premium smoothing reserving amount ) if the life insurer chooses to calculate a premium smoothing reserving amount and the PSR periods for policies in the class of policies begins, continues or ends in the income year: (c) section EY 26 , for unearned premium reserves (the unearned premium reserving amount ), if the life insurer chooses to not calculate a premium smoothing reserving amount: (d) section EY 27 , for capital guarantee reserves (the capital guarantee reserving amount ). Choice (5) Despite subsection (4)(b) and (c), a life insurer may not change between calculating a premium smoothing reserving amount and an unearned premium reserving amount for a class of policies once the premium smoothing reserving amount is used for the class of policies. If a policy in a class of policies does not meet the relevant requirements described in subsection (6), then a life insurer has an unearned premium reserving amount for that class of policy. Meaning of PSR period (6) PSR period means, for a policy in the relevant class of policies, a period beginning, continuing or ending in the income year for which–– (a) premiums payable are level or substantially level, and the period is 1 or more years; or (b) there is a material mismatch between the incidence of life risk components and the timing of premiums payable, and the period is 1 or more years. Defined in this Act: actuarially determined , amount , class of policies , deduction , income year , life insurance policy , life insurer , life risk , life risk component , premium , profit participation policy , PSR period , shareholder base allowable deduction , shareholder base income Section EY 23: substituted, on 1 July 2010, by section 190(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).