Words and Phrases - "reinsurance premium"

In the context of a tax-deferred transfer of an insurance business carried on in Canada under s. 138(11.94), how are the terms “reinsurance premium” and “reinsurance commission” in s. 138(11.5)(m) interpreted? After noting that the rules applicable to the transfer of a discontinued business under s. 138(11.94) are set out in ss. 138(11.5)(e) to (m), and 138(11.7) to (11.9), CRA responded:

Pursuant to subparagraph 138(11.5)(m)(i) of the Act, a reinsurance premium paid or payable by the transferor to the transferee in respect of the assumed or reinsured obligations will be included or deducted, as the case may be, only to the extent that may reasonably be regarded as necessary to determine the appropriate amount of income of both the transferor and the transferee. A similar limitation, under subparagraph 138(11.5)(m)(ii) of the Act, applies to a reinsurance commission paid or payable by the transferee to the transferor. …

Whether an amount paid or payable by the transferor to the transferee constitutes a “reinsurance premium” depends on the legal manner by which the insurance business is transferred and whether it is done under a reinsurance arrangement. If this is the case, then the assets transferred by the transferor to the transferee in exchange for assuming the transferred obligations may be a “reinsurance premium”. We note, however, that the term would not be limited to such assets and that it may apply more broadly to any amounts paid or payable to the transferee as consideration for the assumed obligations in respect of the transferred insurance business. ...

[Respecting whether] the term “reinsurance commission” … carries the meaning [in Reg.] 1408(1)…[w]e note that there is no explicit reference in the definition to subsection 138(11.5) or (11.94) of the Act. Further, paragraph 138(11.5)(m) of the Act refers to an amount that is paid or payable by the transferee to the transferor, whereas the definition under subsection 1408(1) of the Regulations generally refers to the excess of the premium paid by the policyholder for the policy over the consideration payable by the insurer in respect of the reinsurance or assumption of the risk.