IN102 (Issue 2): Classification of Risk Policy

Issue 2 of IN102 has been issued by SARS and has the purpose of providing guidance on the interpretation and application of the definition of “risk policy” in section 29A(1) of the Income Tax Act (“the Act”). The purpose of Issue 1 of IN102 was similar to that of Issue 2, but in addition it also aimed to provide guidance on the once-off election by an insurer to transfer certain policies or classes of policies, issued before 1 January 2016, to the risk policy fund under section 29A(13B) of the Act. Issue 1 of IN102 highlighted that insurers should disclose the election to allocate policies to the risk policy fund in the tax return for the 2016 year of assessment. Given the time which has lapsed since the election had to be made, Issue 2 no longer includes a section dealing with the “once-off election to transfer policies or classes of policies to the risk policy fund”. 

The rest of the IN however remains as before and deals with the following aspects which provides guidance to insurers on which policies, issued on or after 1 January 2016, can be classified as risk policies:

• The law and the application thereof;
• Meaning of a risk policy
• Meaning of substantially the whole
• Date of issue of a policy
• A new policy
• Amendments to an existing policy
• Reinsurance arrangements, and specifically the allocation of new policies as well as the date of issue of a reinsurance policy.

A copy of issue 2 of IN102 can be accessed here.

20/05/2022