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TIOPA10/S371GA(5) limits the scope of TIOPA10/S371GA(2)(a) in its application to reinsurance contracts. They shall be included only to the extent that the 鈥渙riginal contract of insurance鈥� would fall within TIOPA10/S371GA(2)(a).

鈥淥riginal contract of insurance鈥� (defined at TIOPA10/S371GA(9)), for the purposes of a contract of reinsurance, means the contract of insurance which starts the flow of reinsurance, i.e. the original source of the reinsured risk.

TIOPA10/S371GA(5) therefore excludes contracts of reinsurance where the original insured party is neither a connected UK resident company, nor a UK PE of a connected non-UK resident company, of the CFC.

Example

A UK insurance company 鈥淎鈥� writes contracts of insurance with UK resident persons. A CFC connected with A derives profits from the reinsurance of A鈥檚 business. These profits are excluded from Chapter 7 by TIOPA10/S371GA(5) because the original contracts of insurance were entered into with a person not connected with the CFC and are therefore outside the scope of TIOPA10/S371GA(2)(a).

Although both have a similar fact pattern the outcome of the above example and the first example in INTM210400 is different. The difference arises because in the above example the CFC is not connected to the UK resident persons who are the insured parties within the original contract of insurance.