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Catastrophe Fund
20.11 It has been put to the Committee in submissions that insurance companies should be allowed to deduct from taxable income additions to provisions built up to meet an exceptional aggregation of claims arising from a catastrophe. The maintenance of a high solvency margin, it is argued, would be facilitated by such deductions and the provisions would be available for emergency purposes, payments from the provisions not of course being allowable deductions.
20.12. While substantial provisions to meet unusual claims are desirable in any business, the Committee does not favour special treatment in this regard for insurance companies. The uncertainty of the basis of such provisions would cause serious administrative difficulties in deciding to what extent the amounts claimed should be allowed as deductions.