CRA considers that general insurance agents may not claim a s. 32(1) commission reserve re future claims adjusting services

S. 32(1) permits an insurance agent or broker to deduct a reserve from unearned commissions otherwise included in income under s. 12(1)(a) respecting insurance contracts (other than life insurance contracts) equal to the lesser of a pro rata portion of the commission based on remaining term of the contracts and the amount which otherwise would have been computed under s. 20(1)(m).

CRA considers that the s. 20(1)(m) branch of the reserve "must be [for] an amount described in paragraph 12(1)(a)…that relates to a binding obligation to provide specific types of client support services after the end of the year," so that "services that might be required in relation to claims under the policies (for example, claims adjusting) would not be eligible since they normally would be contingent amounts…[under] paragraph 18(1)(e)." On a global basis, this future rendering of claims-related services might be reasonably anticipated and quantifiable, but would be highly contingent for any particular policy. CRA did not discuss any argument that s. 33(2) of the Interpretation Act (singular includes plural) accommodates such a global approach.

Neal Armstrong. Summary of 20 August 2015 T.I. 2015-0588871E5 under s. 32(1)(b).