I-3, r. 1 - Regulation respecting the Taxation Act

Section 92.11r12.10 Disposition versions

2019-06-19

92.11R12.10. For the purposes of section 92.11R12.3 for a taxation year and subject to the fourth paragraph, an insurer may revise the rates of interest, mortality or policy lapse used by the issuer of the policies referred to in subparagraph b to eliminate all or any part of the reserve deficiency determined in subparagraph c, where

(a)  a disposition to which section 832.7 of the Act applies has been made to the insurer during the year by a person with whom it was dealing at arm’s length;

(b)  the insurer assumes, as a result of the disposition referred to in subparagraph a, obligations under life insurance policies in respect of which it may claim an amount as a reserve for the year under subparagraph c of the first paragraph of section 92.11R12.2;

(c)  the reserve deficiency determined by the following formula is a positive amount:

A − B − C; and

(d)  the reserve deficiency determined in subparagraph c may reasonably be attributed to the fact that the rates of interest, mortality and policy lapse used by the issuer of the policies referred to in subparagraph b to determine the cash surrender value of the policies or the premiums in respect of those policies are no longer reasonable in the circumstances.

In the formula in subparagraph c of the first paragraph,

(a)  A is the aggregate of all amounts received or receivable by the insurer from the person referred to in subparagraph a of the first paragraph in respect of the policies referred to in subparagraph b of the first paragraph;

(b)  B is the aggregate of all amounts paid or payable by the insurer to the person referred to in subparagraph a of the first paragraph in respect of commissions in respect of the amounts referred to in subparagraph a; and

(c)  C is the aggregate of the maximum amounts that may be claimed by the insurer for the year as a reserve under subparagraph c of the first paragraph of section 92.11R12.2, determined without reference to this section, in respect of the policies referred to in subparagraph b of the first paragraph.

The rates revised under the first paragraph are deemed to have been used by the issuer of the policies referred to in subparagraph b of the first paragraph for the purpose of determining the cash surrender value of the policies or the premiums in respect of those policies.

If in accordance with this section an insurer has revised the rates of interest, mortality or policy lapse used by the issuer of the policies referred to in subparagraph b of the first paragraph, the Minister may, for the purposes of section 92.11R12.3 and the third paragraph, make further revisions to the revised rates to the extent that the insurer’s revisions to those rates are not reasonable in the circumstances.

S.Q. 2019, c. 14, s. 628.