French General Tax Code
In forceI. - Insurance and reinsurance undertakings, supplementary occupational pension funds mentioned in Article L. 381-1 of the Insurance Code, the supplementary professional retirement mutuals or unions referred to in Article L. 214-1 du code de la mutualité et les institutions de retraite professionnelle supplémentaire mentionnées à l'article L. 942-1 of the Social Security Code may set up a tax-free provision to deal with fluctuations in claims experience relating to group insurance operations against death, incapacity or disability risks.
The provision is calculated for each insurance contract covering the risks in question or for each set of contracts of the same nature if their results are pooled. For the application of this provision, the results of different contracts are considered to be mutualised when a common annual technical operating account is drawn up and these contracts stipulate a profit-sharing clause that is identical for all policyholders.
II. - The annual allocation to the provision is limited to 75% of the technical profit of the contract or group of contracts concerned, net of reinsurance cessions.
The total amount reached by the provision may not, for each financial year, exceed, in relation to the amount of premiums or contributions relating to the contracts concerned, net of cancellations and reinsurance cessions, earned during the financial year: 23% for a headcount of at least 500,000 policyholders, 33% for a headcount of 100,000 policyholders, 87% for a headcount of 20,000 policyholders and 100% for a headcount of no more than 10,000 policyholders. Where the headcount concerned is between two of the numbers representing the headcount mentioned in the previous sentence, the rate is determined on the basis of the headcount in accordance with the procedures laid down by the decree in the Conseil d'Etat provided for in V of this article.
III. - The technical profit referred to in the first paragraph of II is determined before application of the reintegration provided for in IV of this article. It is defined as the difference between, on the one hand, the amount of premiums or contributions referred to in the second paragraph of II, less allocations to legally constituted provisions, with the exception of the surplus participation provision and, on the other hand, the amount of claims expenses, plus expenses attributable to the policy or policies in question, with the exception of the profit participation paid, as well as a proportion of other expenses. When, during the financial year, technical interest is incorporated into the mathematical provisions legally established and relating to the contracts concerned, the technical profit includes the amount of this interest.
IV. - Each provision is allocated to offset underwriting losses for the financial year in the order in which the annual allocations were made. Annual allocations that have not been used for this purpose within ten years are deducted from taxable profits in the eleventh year following the year in which they were booked.
In the event of the transfer of all or part of a portfolio of contracts, the provision corresponding to the risks transferred is also transferred and reported to the taxable profit of the new insurer or the new supplementary occupational pension scheme under the same conditions as the initial insurer would have done in the absence of such a transaction.
V. - The procedures for accounting for, declaring and applying this provision, in particular with regard to the determination of technical profit, are set by decree in the Conseil d'Etat.
