British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 SUMMARY 1
SOLVENCY AND FINANCIAL
CONDITION REPORT
BRITISH GAS INSURANCE LIMITED
Year Ended 31 December 2022
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 SUMMARY 2
CONTENTS
SUMMARY ....................................................................................................................................................... 3
DIRECTORS' REPORT ........................................................................................................................................ 8
INDEPENDENT AUDITOR'S REPORT .................................................................................................................. 9
A BUSINESS AND PERFORMANCE .............................................................................................................. 15
A.1 BUSINESS .............................................................................................................................................................. 15
A.2 UNDERWRITING PERFORMANCE .......................................................................................................................... 17
A.3 INVESTMENT PERFORMANCE ............................................................................................................................... 18
A.4 PERFORMANCE OF OTHER ACTIVITIES ................................................................................................................. 18
A.5 ANY OTHER INFORMATION .................................................................................................................................. 18
B SYSTEM OF GOVERNANCE ...................................................................................................................... 19
B.1 GENERAL INFORMATION ON THE SYSTEM OF GOVERNANCE .............................................................................. 19
B.2 FIT AND PROPER REQUIREMENTS ........................................................................................................................ 22
B.3 RISK MANAGEMENT SYSTEM INCLUDING THE OWN RISK AND SOLVENCY ASSESSMENT ................................... 23
B.4 INTERNAL CONTROL SYSTEM ............................................................................................................................... 26
B.5 INTERNAL AUDIT FUNCTION ................................................................................................................................. 27
B.6 ACTUARIAL FUNCTION ......................................................................................................................................... 27
B.7 OUTSOURCING ..................................................................................................................................................... 27
B.8 ANY OTHER INFORMATION .................................................................................................................................. 28
C RISK PROFILE .......................................................................................................................................... 29
C.1 UNDERWRITING RISK............................................................................................................................................ 30
C.2 MARKET RISK ........................................................................................................................................................ 31
C.3 CREDIT RISK .......................................................................................................................................................... 31
C.4 LIQUIDITY RISK ...................................................................................................................................................... 32
C.5 OPERATIONAL RISK ............................................................................................................................................... 32
C.6 OTHER MATERIAL RISKS ....................................................................................................................................... 32
C.7 ANY OTHER INFORMATION .................................................................................................................................. 33
D VALUATION FOR SOLVENCY PURPOSES .................................................................................................. 35
D.1 ASSETS .................................................................................................................................................................. 36
D.2 TECHNICAL PROVISIONS ....................................................................................................................................... 36
D.3 OTHER LIABILITIES ................................................................................................................................................ 38
D.4 ALTERNATIVE METHODS FOR VALUATION ........................................................................................................... 38
D.5 ANY OTHER INFORMATION .................................................................................................................................. 38
E CAPITAL MANAGEMENT......................................................................................................................... 39
E.1 OWN FUNDS ......................................................................................................................................................... 39
E.2 SOLVENCY CAPITAL REQUIREMENT AND MINIMUM CAPITAL REQUIREMENT .................................................... 41
E.3 USE OF THE DURATION-BASED EQUITY RISK SUB-MODULE IN THE CALCULATION OF THE SCR .......................... 44
E.4 DIFFERENCES BETWEEN THE STANDARD FORMULA AND PARTIAL INTERNAL MODEL ........................................ 45
E.5 NON-COMPLIANCE WITH THE MCR AND NON-COMPLIANCE WITH THE SCR ...................................................... 45
E.6 ANY OTHER INFORMATION .................................................................................................................................. 45
F GLOSSARY .............................................................................................................................................. 46
G APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES .................................................................. 47
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 SUMMARY 3
SUMMARY
(Unaudited)
BUSINESS
British Gas Insurance Limited underwrites general insurance risks in England, Scotland, and Wales within the
Solvency II assistance class of business. The HomeCare range covers the breakdown of domestic boilers and
central heating systems with options to cover plumbing & drains and home electrics. We also offer appliance
cover. Customers can also arrange home insurance through British Gas, but we do not underwrite it, so this
report does not cover home insurance.
We are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and
the Prudential Regulation Authority.
British Gas Insurance Limited is part of the Centrica Group. Business is introduced to us by our sister company,
British Gas Services Limited, authorised and regulated by the Financial Conduct Authority. British Gas Services
Limited undertake sales & marketing, product design and retail pricing. They also deal with claims handling &
fulfilment, policy administration and complaints handling on our behalf.
The information presented in this report is up to 31 December 2022. Our financial and liquidity positions are
regularly monitored and remain robust.
UNDERWRITING PERFORMANCE
Overall underwriting profitability reduced in 2022 versus the prior year due to a combination of a lower number
of policies in force and an increase in claims and servicing costs. Overall product holdings declined despite stable
customer retention due to lower customer acquisitions in a challenging macro-economic environment. There
was significant management focus on service investment throughout the year to improve customer outcomes.
As such, costs increased in 2022 from a higher volume of boiler service visits completed following continued
recovery after Covid-19. Breakdowns were also higher than 2021, driven in part by changes in customer
behaviour post pandemic as well as a period of exceptionally cold weather in December.
£64.7m
£21.7m
2021
2022
BGIL underwriting profit (pre-tax) for the 12 months ending 31 December
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 SUMMARY 4
SYSTEM OF GOVERNANCE
Governance is provided through the Board and its delegated authority, sub-committees, and Executive
committees.
We have a robust risk management system to identify, measure, monitor, manage and report on the risks to our
business strategy and delivery of our objectives. We operate a 'three lines of defence' governance model to
ensure appropriate segregation of risk ownership, oversight, and assurance responsibilities.
• First line: ownership of risk-taking and risk management in respect of business-as-usual activities,
change programmes and strategy.
• Second line: protecting and enabling the business to achieve its objectives by providing advice and
oversight of risk taking and risk management while developing and delivering the relevant tools and
methodologies to support business risk taking.
• Third line: independent and objective assurance of the effectiveness of risk management and internal
controls through Internal Audit.
Section B has more information on our system of governance.
RISK PROFILE
Operational risk and underwriting risk remain our key risks. Cold weather risk is our most significant underwriting
risk, and how British Gas Services Limited deal with customers drives our operational risk.
Compared to many other insurers, our operational risks represent a bigger proportion of our total risk profile.
This is a feature of our comparatively low underwriting risk due to the quick settlement of claims at a fixed unit
cost per claim. We also have low market risk due to our low risk investment strategy.
Further information is included in Section C.
The charts above show our risk profile based on the amount of capital held for each risk, assessed on an 'extreme
scenario' basis.
Underwriting risk, 35%
Counterparty default risk , 7%
Operational risk , 56%
Market risk, 2%
2022
Underwriting risk, 36%
Counterparty default risk , 7%
Operational risk , 53%
Market risk, 3%
2021
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 SUMMARY 5
VALUATION FOR SOLVENCY PURPOSES
2022 assets are broadly in line with 2021, and an increase in Liabilities is primarily due to the rise in future
contractual costs paid by BGIL to BGSL per claim. As a result, this leads to Own funds decreasing by £20m.
Further information on assets and liabilities is provided in section D.
Own funds, £107.8m
Own funds, £127.8m
Liabilities, £24.7m
Liabilities, £40.3m
Assets, £152.5m
Assets, £148.1m
2021
2022
BGIL Solvency II balance sheet as at 31 December
Assets Liabilities
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 SUMMARY 6
CAPITAL MANAGEMENT
Our aim is to maintain sufficient capital to meet claims as they fall due, protect the interests of customers, and
meet operational needs and regulatory requirements. We hold capital resources above the regulatory capital
required to ensure that the business is adequately capitalised to remain resilient in a range of stress scenarios.
Subject to ongoing business performance being within risk appetite, specific requirements in the Dividend Policy
and other relevant factors, our approach is to pay funds in excess of the risk appetite as a dividend to our parent
company, GB Gas Holdings Limited. We paid an interim dividend of £30m in October 2022. The company is
financially resilient.
The Minimum Capital Requirement (MCR) that we must hold is £31.9m (£33.1m in 2021). We have maintained
sufficient own funds to meet both our Solvency Capital Requirement and our MCR throughout the reporting
period.
Section E contains further information on capital management.
£73.4m
£71.0m
£127.8m
£107.8m
Capital coverage = 152%, Solvency II surplus = £36.8m
Capital coverage = 174%, Solvency II surplus = £54.4m
2021
2022
Capital Coverage as at 31 December
Eligible own funds Solvency Capital Requirement
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 SUMMARY 7
MEANING OF TERMS
Term
Meaning with this report
Capital coverage
Insurers are required to hold enough eligible own funds to cover
the SCR.
The capital coverage ratio, defined as eligible own funds divided by
the SCR, must be at least 100%.
Counterparty default risk (credit risk)
Credit risk is defined as the risk of loss resulting from fluctuations in
the credit standing of issuers of securities, counterparties, and any
debtors to which British Gas Insurance Limited is exposed.
Market risk
Market risk is the risk of loss resulting from fluctuations in the level
and volatility of market prices of assets and liabilities.
Operational risk
Operational risk is the risk of loss resulting from inadequate or
failed internal processes, people, systems, or external events.
Own funds
Own funds represent the excess of assets over liabilities (on a
Solvency II basis).
Eligible own funds
Eligible own funds are own funds after approved dividends have
been deducted.
Parent company
The parent company of British Gas Insurance Limited is GB Gas
Holdings Limited, part of the Centrica Group.
Solvency II
Solvency II is an EU-wide regulatory regime. Although some PRA
rules have changed to reflect the UK withdrawal from the European
Union, Solvency II continues to be the regulatory regime for UK
insurers.
Solvency Capital Requirement (SCR)
The SCR represents the level of eligible own funds required to
provide assurance that the Company can absorb significant losses in
remote (1-in-200) scenarios and still meet policyholders' claims
costs and other obligations as they fall due.
Underwriting risk
Underwriting risk refers to fluctuations in the timing, frequency,
and severity of insured events relative to the expectations of the
insurer at the time of underwriting.
There is also a glossary of terms in Section G.
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 DIRECTORS' REPORT 8
DIRECTORS' REPORT
(Unaudited)
We acknowledge our responsibility for preparing the Solvency and Financial Condition Report in all
material respects in accordance with the PRA Rules and Solvency II Regulations.
We are satisfied that:
• throughout the financial year in question, the insurer has complied in all material respects with the
requirements of the PRA rules and Solvency II Regulations as applicable to the Company and
• It is reasonable to believe that, at the date of the publication of the Solvency and Financial Condition
Report, the Company has continued to comply and will continue to comply in the future.
For and on behalf of the Board of British Gas Insurance Limited:
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 INDEPENDENT AUDITOR'S REPORT 9
INDEPENDENT AUDITOR'S REPORT
REPORT OF THE EXTERNAL INDEPENDENT AUDITOR TO THE DIRECTORS OF BRITISH GAS INSURANCE LIMITED
('THE COMPANY') PURSUANT TO RULE 4.1 (2) OF THE EXTERNAL AUDIT CHAPTER OF THE PRA RULEBOOK
APPLICABLE TO SOLVENCY II FIRMS
Report on the Audit of the relevant elements of the Solvency and Financial Condition Report ("SFCR")
Opinion
Except as stated below, we have audited the following documents prepared by the Company as at 31 December
2022:
• the ‘Valuation for solvency purposes’ and ‘Capital Management’ sections of the SFCR of the Company as at
31 December 2022, (‘the Narrative Disclosures subject to audit’); and
• Company templates S.02.01.02, S.17.01.02, S.23.01.01, S.28.01.01 (‘the Templates subject to audit’).
The Narrative Disclosures subject to audit and the Templates subject to audit are collectively referred to as the
‘relevant elements of the SFCR’.
We are not required to audit, nor have we audited, and as a consequence do not express an opinion on the
Other Information which comprises:
• information contained within the relevant elements of the SFCR set out about above which are, or derive
from the Solvency Capital Requirement, as identified in the Appendix to this report;
• the ‘Executive summary’, ‘Business and performance’, ‘System of governance’ and ‘Risk profile’ elements of
the SFCR;
• Company templates S.05.01.02, S.05.02.01, S.19.01.21, S.25.02.21, S.25.03.21;
• the written acknowledgement by management of their responsibilities, including for the preparation of the
SFCR (‘the Responsibility Statement’).
To the extent the information subject to audit in the relevant elements of the SFCR includes amounts that are
totals, sub-totals or calculations derived from the Other Information, we have relied without verification on the
Other Information.
In our opinion, the information subject to audit in the relevant elements of the SFCR of the Company as at 31
December 2022 is prepared, in all material respects, in accordance with the financial reporting provisions of the
PRA Rules and Solvency II regulations on which they are based, as modified by relevant supervisory
modifications, and as supplemented by supervisory approvals and determinations.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK), including ISA
(UK) 800 and ISA (UK) 805, and applicable law. Our responsibilities under those standards are further described
in the Auditor’s Responsibilities for the Audit of the relevant elements of the Solvency and Financial Condition
Report section of our report. We are independent of the Company in accordance with the ethical requirements
that are relevant to our audit of the SFCR in the UK, including the Financial Reporting Council’s (the ‘FRC’s’)
Ethical Standards as applied to public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 INDEPENDENT AUDITOR'S REPORT 10
Emphasis of Matter – Basis of Accounting
We draw attention to the ‘Valuation for solvency purposes’ and ‘Capital Management’ sections of the SFCR,
which describe the basis of accounting. The SFCR is prepared in compliance with the financial reporting
provisions of the PRA Rules and Solvency II regulations, and therefore in accordance with a special purpose
financial reporting framework. The SFCR is required to be published, and intended users include but are not
limited to the PRA. As a result, the SFCR may not be suitable for another purpose. Our opinion is not modified
in respect of these matters.
Conclusions relating to going concern
In auditing the SFCR, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the SFCR is appropriate.
Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern
basis of accounting included:
• assessing the underlying business plans and forecasts that support the key assumptions such as pricing and
claims rates;
• obtaining the latest intercompany agreements with other Centrica Plc subsidiaries to assess whether any
price or cost assumptions have changed;
• assessing the company’s Own Risk and Solvency Assessment Report (ORSA) to support our understanding
of the key risks faced by the company, its ability to continue as a going concern, and the longer-term viability
of the company;
• considering the challenging macroeconomic environment with regard to significant cost inflation,
particularly in labour markets;
• obtaining and inspecting correspondence between the company and its regulators, the Prudential
Regulation Authority and Financial Conduct Authority, to identify any items of interest which could
potentially indicate either non-compliance with legislation or potential litigation or regulatory action held
against the company; and
• assessing the appropriateness of the going concern disclosure
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for
issue.
Other Information
The Directors are responsible for the Other Information.
Our opinion on the relevant elements of the SFCR does not cover the Other Information and, we do not express
an audit opinion or any form of assurance conclusion thereon.
Our responsibility is to read the Other Information and, in doing so, consider whether the Other Information is
materially inconsistent with the relevant elements of the SFCR, or our knowledge obtained in the course of the
audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there is a material misstatement in the relevant
elements of the SFCR themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of this Other Information, we are required to report that fact.
We have nothing to report in this regard.
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 INDEPENDENT AUDITOR'S REPORT 11
Responsibilities of Directors for the Solvency and Financial Condition Report
The Directors are responsible for the preparation of the SFCR in accordance with the financial reporting
provisions of the PRA rules and Solvency II regulations which have been modified by the modifications and
supplemented by the approvals and determinations made by the PRA under section 138A of FSMA, the PRA
Rules and Solvency II regulations on which they are based.
The Directors are also responsible for such internal control as they determine is necessary to enable the
preparation of a SFCR that is free from material misstatement, whether due to fraud or error.
Auditor’s Responsibilities for the Audit of the relevant elements of the Solvency and Financial Condition
Report
It is our responsibility to form an independent opinion as to whether the relevant elements of the SFCR are
prepared, in all material respects, with financial reporting provisions of the PRA Rules and Solvency II regulations
on which they are based.
Our objectives are to obtain reasonable assurance about whether the relevant elements of the SFCR are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but it is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the decision making or the judgement of the users taken on the basis of the SFCR.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: https://www.frc.org.uk/auditorsresponsibilities. The same responsibilities apply to the audit of the
SFCR.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is
detailed below.
We considered the nature of the company’s industry and its control environment and reviewed the company’s
documentation of their policies and procedures relating to fraud and compliance with laws and regulations. We
also enquired of management , internal audit and the audit committee about their own identification and
assessment of the risks of irregularities.
We obtained an understanding of the legal and regulatory frameworks that the company operates in, and
identified the key laws and regulations that:
• had a direct effect on the determination of material amounts and disclosures in the SFCR. These included
Solvency II as implemented in the UK and
• do not have a direct effect on the SFCR but compliance with which may be fundamental to the company’s
ability to operate or to avoid a material penalty. These included Companies Act 2006 and related Company
Law, the Prudential Regulation Authority and the Financial Conduct Authority.
We discussed among the audit engagement team including relevant internal specialists such as IT and analytic
specialists regarding the opportunities and incentives that may exist within the organisation for fraud and how
and where fraud might occur in the financial statements.
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 INDEPENDENT AUDITOR'S REPORT 12
As a result of performing the above, we identified the greatest potential for fraud in the following areas, and our
specific procedures performed to address it are described below:
• Estimation of the Bound But Not Incepted (BBNI) Solvency II adjustments requires significant management
judgement, and therefore there is potential for management bias through manipulation. In response to the
identified risk, our testing included: assessing the design and implementation of key controls that are
related to the Solvency II reporting process; obtaining management's methodology and calculations related
to technical provisions and assessing this for reasonableness; testing the accuracy and completes of the
BBNI volumes reported.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to
the risk of management override. In addressing the risk of fraud through management override of controls,
testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made
in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of business.
In addition to the above, our procedures to respond to the risks identified included the following:
• reviewing SFCR disclosures by testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the financial statements.
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks
of material misstatement due to fraud;
• enquiring of management and in-house legal counsel concerning actual and potential litigation and claims,
and instances of non-compliance with laws and regulations; and reading minutes of meetings of those
charged with governance, reviewing correspondence with the PRA and FCA.
Other Matter
The Company has authority to calculate its Solvency Capital Requirement using a partial internal model (‘‘the
Model’’) approved by the Prudential Regulation Authority in accordance with the Solvency II Regulations. In
forming our opinion (and in accordance with PRA Rules), we are not required to audit the inputs to, design of,
operating effectiveness of and outputs from the Model, or whether the Model is being applied in accordance
with the Company’s application or approval order.
Report on Other Legal and Regulatory Requirements.
In accordance with Rule 4.1 (3) of the External Audit Chapter of the PRA Rulebook for Solvency II firms we are
also required to consider whether the Other Information is materially inconsistent with our knowledge obtained
in the audit of British Gas Insurance Limited’s statutory financial statements. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in relation to this matter.
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 INDEPENDENT AUDITOR'S REPORT 13
Use of our Report
This report is made solely to the Directors of British Gas Insurance Limited in accordance with Rule 4.1 (2) of the
External Audit Chapter of the PRA Rulebook for Solvency II firms. We acknowledge that our report will be
provided to the PRA for the use of the PRA solely for the purposes set down by statute and the PRA’s rules. Our
audit work has been undertaken so that we might state to the insurer’s Directors those matters we are required
to state to them in an auditor’s report on the relevant elements of the SFCR and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company
and the PRA, for our audit work, for this report or for the opinions we have formed.
Signature
David Rush
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
30 March 2023
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 INDEPENDENT AUDITOR'S REPORT 14
Appendix – relevant elements of the Solvency and Financial Condition Report that are not subject to audit
Solo partial/internal model
The relevant elements of the SFCR that are not subject to audit comprise:
• The following elements of template S.02.01.02:
− Row R0550: Technical provisions – non-life (excluding health) – risk margin
− Row R0590: Technical provisions – health (similar to non-life) – risk margin
− Row R0640: Technical provisions – health (similar to life) – risk margin
− Row R0680: Technical provisions – life (excluding health and index-linked and unit-linked) risk margin
− Row R0720: Technical provisions – Index-linked and unit-linked – risk margin
• The following elements of template S.17.01.02
− Row R0280: Technical provisions calculated as a sum of BE and RM – Risk margin
− Rows R0290 to R0310 – Amount of transitional measure on technical provisions
• The following elements of template S.23.01.01
− Row R0580: SCR
− Row R0600: MCR
− Row R0620: Ratio of Eligible own funds to SCR
− Row R0640: Ratio of Eligible own funds to MCR
− Row R0740: Adjustment for restricted own fund items in respect of matching adjustment portfolios and
ring fenced funds
• The following elements of template S.28.01.01
− Row R0310: SCR
− Row R0320: MCR cap
− Row R0330: MCR floor
− Row R0340: Combined MCR
− Row R0400: Minimum Capital Requirement
Elements of the Narrative Disclosures subject to audit identified as ‘unaudited’
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 BUSINESS AND PERFORMANCE 15
INTRODUCTION TO THE SFCR
The requirement to produce an annual Solvency and Financial Condition Report follows the introduction of the
Solvency II regime on 1 January 2016 for the EU insurance industry. This includes standards for assessing capital
requirements and governance over risk management, with the principal objectives of improved comparability
of information across the insurance industry and increased policyholder protection. The summary is intended
for policyholders, with the remaining sections for analysts.
This report for British Gas Insurance Limited (“BGIL” or “the Company”) presents information on business and
performance, the system of governance, risk profile, valuation of assets and liabilities, and capital management.
Information about the business and performance of the Company is also included in BGIL’s Annual Report and
Financial Statements for 2022.
Parts of the SFCR are subject to external audit, as indicated and explained in the Independent Auditor’s report.
Figures are presented on a Solvency II basis unless indicated otherwise.
A BUSINESS AND PERFORMANCE
(Unaudited)
A.1 BUSINESS
A.1.1 COMPANY INFORMATION
British Gas Insurance Limited (BGIL) is registered in England and Wales under the company registration number
06608316. It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority under Financial Services Register number 490565.
Its registered office and details of its supervisors and auditor are as follows:
Registered Office
British Gas Insurance Limited
Millstream, Maidenhead Road
Windsor
Berkshire
SL4 5GD
+44 (0) 1753 494000
External Auditor
Deloitte LLP
Hill House
1 New Street Square
London
EC4A 3HQ
+44 (0) 20 7936 3000
Supervisory Authority
Prudential Regulatory Authority
20 Moorgate
London
EC2R 6DA
+44 (0) 20 7601 4444
Supervisory Authority
Financial Conduct Authority
12 Endeavour Square
London
E20 1JN
+44 (0) 20 7066 1000
A.1.2 GROUP STRUCTURE
BGIL is a private company limited by shares and is a wholly owned subsidiary of GB Gas Holdings Limited
(“GBGH”) within the Centrica Group (“the Group”). BGSL is authorised and regulated by the Financial Conduct
Authority. BGSL introduces business to BGIL, and services such as policy administration and claims handling &
fulfilment are outsourced to BGSL. Further information is in Section B.7. The following chart shows the group
structure in 2022.
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 BUSINESS AND PERFORMANCE 16
A.1.3 LINES OF BUSINESS
BGIL underwrites general insurance risks in England, Scotland, and Wales, within the assistance class of business,
covering the breakdown of domestic boilers and central heating systems, plumbing & drains, and electrical and
gas appliances. The Company does not underwrite risks outside the UK.
CENTRICA PLC
CENTRICA HOLDINGS
LIMITED
GB GAS HOLDINGS
LIMITED
OTHER GROUP
COMPANIES
BRITISH GAS
SERVICES LIMITED
GROUP
BG INSURANCE
APPOINTED
REPRESENTATIVES
OF BGSL
BRITISH GAS
INSURANCE
LIMITED
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 BUSINESS AND PERFORMANCE 17
A.2 UNDERWRITING PERFORMANCE
A.2.1 2022 PERFORMANCE
Under UK Generally Accepted Accounting Practice (UK GAAP), the underwriting performance is as follows:
The number of policies in force decreased to 6.3m at 31 December 2022 (2021: 7.2m). Overall underwriting
profitability reduced in 2022 versus the prior year due to a combination of a lower number of policies in force
and an increase in claims and servicing costs. Overall product holdings declined despite stable customer
retention due to lower customer acquisitions in a challenging macro-economic environment. There was
significant management focus on service investment throughout the year to improve customer outcomes. As
such, costs increased in 2022 from a higher volume of boiler service visits completed following continued
recovery after Covid-19. Breakdowns were also higher than 2021, driven in part by changes in customer
behaviour post pandemic as well as a period of exceptionally cold weather in December.
No reinsurance contracts were entered into during the current or prior years.
2022 2021
£m £m
Gross written premium 829.1 863.4
Gross earned premium 853.6 905.8
Claims incurred (400.1) (357.9)
Expenses incurred (431.8) (483.2)
Underwriting profit (pre-tax) 21.7 64.7
Combined operating ratio (COR) 97.5% 92.9%
BGIL underwriting performance for the 12 months to 31 December
(UK GAAP)
2022 2022
Actual Plan
£m £m
Gross written premium 829.1 893.6
Gross earned premium 853.6 897.9
Claims incurred (400.1) (387.8)
Expenses incurred (431.8) (446.3)
Underwriting profit 21.7 63.7
Combined operating ratio (COR) 97.5% 92.9%
BGIL underwriting performance for 12 months to 31 December (UK
GAAP)
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 BUSINESS AND PERFORMANCE 18
A.3 INVESTMENT PERFORMANCE
A.3.1 INVESTMENTS BY ASSET CLASS
Investments held by BGIL are shown below. BGIL invests in short duration, high-quality securities, and deposit-
based investments.
There has been no material change in investment holdings.
A.3.2 INVESTMENT INCOME AND EXPENSES
All investment income and expenses relate to unit holdings in short-term money market funds and deposits with
financial institutions. Expenses represent fees paid to investment managers. The investment income increased
in 2022 compared to 2021, this was caused by an increase in yields due to change of base rates set by the Bank
of England.
A.4 PERFORMANCE OF OTHER ACTIVITIES
BGIL pays dividends to its parent company, GB Gas Holdings Limited. BGIL paid an interim dividend of £30m in
October 2022 (2021: £49m).
Further information is in Section E.1.
A.5 ANY OTHER INFORMATION
BGIL does not invest in equity or have any investments in securitisation.
There is no other information to report.
2022 2021
£m £m
Collective investment undertakings 147.9 152.4
Total investments 147.9 152.4
Investments as at 31 December
2022 2021
£m £m
Investment income 2.2 0.2
Investment expenses (0.2) (0.2)
Net investment income 2.1 0.0
Investment income for 12 months to 31 December
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Solvency and Financial Condition Report 2022
BGIL SFCR 2022 SYSTEM OF GOVERNANCE 19
B SYSTEM OF GOVERNANCE
(Unaudited)
B.1 GENERAL INFORMATION ON THE SYSTEM OF GOVERNANCE
The prudential governance framework for BGIL has been in place since January 2019. BGIL and BGSL are separate
legal entities which are governed via a common Board, Risk Committee and Audit Committee. Common
Nominations and Remuneration Committees are also in place.
B.1.1 GOVERNANCE STRUCTURE.
The committee structure for BG Insurance (BGIL & BGSL) is shown below. The grey boxes relate to BGIL only.
BG Insurance
Board
Nominations
Committee
Remuneration
Committee
BGIL Prudential
Committee
British Gas
Risk Committee
Audit
Committee
BG Insurance Board
Performance, Risk &
Conduct Forums &
Processes
BGLT Management
Conduct &Risk
Committee
BGIL Internal
Model
Governance
Committee
BGIL Risk and
Compliance
Committee
Centrica UK
Governance
Regulated
Business
Grey boxes are in relation to BGIL only
Management activities & committees
BGIL & BGSL combined Board & committees
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BGIL SFCR 2022 SYSTEM OF GOVERNANCE 20
Board
The Board has overall responsibility for the oversight of the management of BGIL. Its objectives include setting
the strategic aims, monitoring management’s performance against those aims, setting risk appetite and ensuring
that effective controls are in place. Any major changes to the Company’s business activities must be approved
by the Board before implementation. The Board meets at least four times a year. Minutes of all Board meetings
are recorded and reflect the substance of the discussions as well as the decisions made.
The Board comprises an independent non-executive chair, independent non-executive directors, and two
executive directors.
Board Sub-Committees
All authority flows from the Board, but it delegates to sub-committees. Responsibilities are set out in the
respective terms of reference.
The following sub-committees are in place for BG Insurance (BGIL & BGSL):
• The Risk Committee: responsibilities include monitoring and reviewing the activities of the Risk
Function and the Compliance Function, monitoring and reviewing the risk management and controls
system, monitoring and overseeing conduct risk, and monitoring and overseeing the development and
use of BGIL’s Partial Internal Model. The committee meets at least four times a year.
• The Audit Committee: the key objective of the committee is to monitor the integrity of the financial
statements, including any financial judgements contained therein. The committee meets as required to
fulfil its obligations, at least four times a year.
• The Nominations Committee: responsible for the nomination and approval of executive positions and
senior management oversight, assurance and group influence positions and ensuring that the ongoing
leadership needs of the organisation are met with particular emphasis on Board and SMF succession.
• The Remuneration Committee: responsible for the effective operation of the Remuneration Policy and
risk adjusted remuneration framework (B.1.3).
Executive Committees
The Board and its sub-committees are supported by the following Executive committees:
• The Management Conduct & Risk Committee, that is responsible for managing risks to BGIL (and the
wider British Gas business) to within acceptable levels and for maintaining a sound enterprise risk
management framework with appropriate internal controls. It specifically monitors conduct
performance and ensures this is monitored and assessed against agreed risk appetite.
• The Prudential Committee, that assists the Executive Directors, Board and Risk and Audit Committees
on specific BGIL financial and Solvency II processes supporting capital calculations, Own Risk and
Solvency Assessment (“ORSA”) processes, internal model governance, Solvency II reporting and balance
sheet assurance.
The British Gas leadership team manages the BG Insurance business and is responsible for developing and
leading the delivery of the strategy.
Executive Sub-Committees
The Executive committees are supported by the following sub-committees:
• Risk & Compliance Committee, that supports the Prudential Committee with respect to BGIL’s risk
management system and oversight activity.
• Internal Model Governance Committee, that supports the effective governance of BGIL’s internal
model.
The Management Conduct & Risk Committee is also supported by several committees that support the
operational needs of BGIL and BGSL.
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BGIL SFCR 2022 SYSTEM OF GOVERNANCE 21
Key Functions
BGIL has the following Solvency II key functions:
• Risk Function (Section B.3),
• Compliance Function (section B.4),
• Internal Audit (Section B.5),
• Actuarial Function (section B.6).
B.1.2 MATERIAL CHANGES TO THE SYSTEM OF GOVERNANCE OVER THE REPORTING PERIOD
In 2022 the Board changed as follows:
• Stuart Vann (independent non-executive); existing Board member resigned as Chair of Remuneration
Committee on 28 February 2022.
• Matthew Bateman (executive) resigned from the Board 31 January 2022.
• Sima Ruparelia (independent non-executive); existing Board member was appointed chair of the
Remuneration Committee from 28 February 2022.
• Stuart Phillips (executive); resigned on 1 December 2022. A CFO is expected to be appoint to the BGI
Board when a permanent replacement is appointed (and subject to regulatory approval).
• Jana Siber (executive) was appointed on 21 July 2022.
B.1.3 REMUNERATION POLICY
The British Gas Remuneration Policy (Policy) sets out the remuneration policy that applies to senior employees
in British Gas Insurance Ltd (BGIL) and British Gas Services Ltd (BGSL).
Our reward philosophy is to develop programmes that support the business needs to attract and retain key
talent, and motivate high performance, rewarding the right skills, behaviours, and outcomes necessary to meet
the long-term business strategy and ensure fair treatment of customers.
There are regulatory requirements about the incentive arrangements that apply to those who run BGIL/BGSL
and key employees whose professional activities have a material impact on the risk profile of the regulated
entities (i.e., Solvency II staff) and BGIL and BGSL staff that are covered by the PRA and FCA Senior Management
& Certification Regime (SMCR).
Where individuals that fulfil regulatory roles for BGIL or BGSL, as set out in the respective Management
Responsibility Maps, are employed by other group entities, the Remuneration Committee will provide input into
their performance assessment.
This policy has been prepared in accordance with the relevant applicable regulations and guidance on
remuneration.
The BGIL Remuneration Policy includes the following components:
• Base salary.
• Incentive Plan: The Annual Performance Incentive Plan (APIP) and the Conditional Share Incentive Plan
(CSIP) are designed to incentivise and reward individual performance and the financial performance of
Centrica.
• Pension: Centrica’s policy is not to offer defined benefit pension arrangements to new employees,
unless this is specifically required by legislation or an existing contractual arrangement.
• Benefits: Centrica offers a range of benefits including some or all of the following: a company-provided
car, or a cash allowance in lieu; life assurance and personal accident insurance; Group Income
Protection; health and medical insurance for the employee and; various benefits available via salary
sacrifice.
• Share plans: UK-based employees may be eligible to participate in HMRC-approved share plans.
Non-Executive fees take into account the need to attract high quality individuals, their responsibilities, time
commitment and market practice and will be periodically subject to independent review at the request of the
Board.
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BGIL SFCR 2022 SYSTEM OF GOVERNANCE 22
B.1.4 MATERIAL TRANSACTIONS
No material transactions have been identified during the reporting period with shareholders, with persons who
exercise a significant influence on the undertaking, or with members of the administrative, management or
supervisory body.
B.2 FIT AND PROPER REQUIREMENTS
BGIL implements policies and procedures to ensure persons who effectively run the Company, or have
responsibility for key functions, have the required skills, knowledge, and expertise to carry out the role and are
fit and proper to do so. Individuals holding Senior Manager Function positions are also required to receive prior
approval from the PRA and/or FCA before they can perform their role.
BGIL undertakes fitness and propriety assessments in the following circumstances:
• Before an individual starts their role.
• Annually, to assess their ‘continued fitness’ to undertake their role.
• When an individual’s role has significantly changed.
• Where there is a potential issue disclosed by an individual which might affect how their fitness and
propriety is viewed.
BGIL’s overall assessment of an individual’s fitness and propriety includes:
• Financial soundness: assessed by conducting financial checks and asking specific questions as part of
the fitness and propriety questionnaire.
• Honesty, integrity, and reputation assessed through:
o Fitness and propriety questionnaire/attestation.
o Regulatory references.
o Standard criminal record check.
o Directors/Companies House check (including disqualifications/dissolutions).
o HR record check for existing employees (disciplinary and/or breaches of conduct rules).
• Competence and capability: during recruitment, at a point where an individual is being considered for
a key function or as part of an annual assessment, a competence and capability assessment is carried
out. The assessment considers:
o Qualifications (where relevant).
o Experience.
o Current level of competence and personal characteristics.
o Skills and knowledge gap analysis which will inform a tailored business induction and
development plan.
The key areas that are considered as part of the skills and knowledge analysis include:
• The markets in which they operate (i.e., insurance or financial services).
• Business strategy and business model.
• System of governance.
• Financial and, where relevant, actuarial analysis.
• Regulatory framework and requirements.
• Objectives linked to delivering regulatory obligations and evidence of performance (as part of end of
year review) confirmed by line manager.
BGIL has complied with the Senior Managers & Certification Regime over the year.
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BGIL SFCR 2022 SYSTEM OF GOVERNANCE 23
B.3 RISK MANAGEMENT SYSTEM INCLUDING THE OWN RISK AND SOLVENCY ASSESSMENT
B.3.1 CHIEF RISK OFFICER
The Risk Function is led by the CRO whose role includes responsibility for:
• The design, development, embedding and overseeing of the risk management strategy and risk
management processes.
• Coordination of the ORSA processes and reporting.
• The compliance relationship with the PRA.
• Validation and performance of BGIL’s capital model.
B.3.2 RISK MANAGEMENT FRAMEWORK
BGIL’s risk management system starts with its Enterprise Risk Management Framework, the primary objective
of which is to ensure that processes are in place for effective planning, organising, leading, and controlling of
BGIL activities to manage the effect of risk on BGIL’s capital and earnings, while ensuring good customer
outcomes and employee safety.
Governance is achieved through the implementation of a ‘three lines of defense’ model that ensures appropriate
segregation of risk ownership, oversight, and assurance responsibilities.
• First line: ownership of risk taking and risk management in respect of business as usual activities, change
and strategy.
• Second line: protecting and enabling the business to achieve its objectives by providing advice and
oversight of risk taking and risk management, while developing and delivering the relevant tools and
methodologies to support business risk taking.
• Third line: independent and objective assurance of the effectiveness of risk management and internal
controls through Internal Audit.
Risk management is embedded in the business and members of the risk team attend key meetings within the
British Gas business. A CRO opinion is provided to the Board and its sub-committees in respect of key decisions.
B.3.3 RISK MANAGEMENT SYSTEM
Risk Policies
To support its objectives, BGIL’s risk management framework includes a comprehensive set of risk policies which
cover the partial internal model as well as all material risk categories to which BGIL is exposed. They are
approved annually by the Board and/or appropriate sub-committees.
Risk Appetite Statements
Risk appetite is the amount of risk the Board is willing to take to meet its strategic objectives.
Risk appetite statements are reviewed annually and approved by the Board.
The Risk Function is responsible for monitoring and reporting against the risk appetite statements. If a risk
appetite threshold has been (or is close to being) breached, action is taken to bring it back within the accepted
range. Out of appetite statements are reported to the Board and relevant sub-committees.
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BGIL SFCR 2022 SYSTEM OF GOVERNANCE 24
B.3.4 RISK PROCESSES
BGIL’s risk management system includes the five processes below.
Identification
BGIL identifies current, emerging, and future risks through various means such as meetings, webinars, and
workshops. Once a new or emerging risk has been identified, a risk owner is assigned, and the risk is added to
the risk register.
Measurement
BGIL measures risk using output of its partial internal model (Section B.3.5). In addition, risks are quantified
through a suite of stress and scenario tests. The prioritisation of the risks is measured using a likelihood and
severity matrix approach.
Management
A comprehensive controls framework exists which ensures risk is managed within agreed appetite and threshold
levels.
Monitoring
Monitoring to ensure that risks are accurately evaluated and adequately controlled is integral to the risk
management processes. Monitoring is achieved through the BGIL controls framework, stress and scenario
testing, risk and control owner reviews, second line monitoring by the Risk and Compliance Functions, and third
line of defence reviews.
Reporting
Risk reporting and communication forms a vital part of the process to ensure visibility and transparency of risks
at both a BGIL and a Group level. Various risk reports are produced including risk dashboards and the ORSA
report.
B.3.5 RISK MODELLING
BGIL uses a partial internal model for risk modelling. Further details are provided in Section E.2. Oversight of the
partial internal model is provided in the first instance by the Internal Model Governance Committee. The
Prudential Committee is responsible for reviewing and challenging the SCR. Oversight is also provided by the
Risk Committee, which is responsible for the ongoing appropriateness of the design and operation of the model,
as well as for reviewing model changes and validation reports.
Independent validation of the modelling underlying the SCR is undertaken by the Risk Function, supported by
an external firm, currently Lane Clark & Peacock. BGIL’s capital model is subject to a cycle of validation using
appropriate techniques for the part of the model under review. It considers the appropriateness of the scope of
the model and covers all parts of the model, adopting a proportionate approach and recognising the materiality
of each model component.
The Board is required to approve BGIL’s SCR, appropriate summaries of internal model results and validation
reports on an annual basis.
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BGIL SFCR 2022 SYSTEM OF GOVERNANCE 25
B.3.6 OWN RISK AND SOLVENCY ASSESSMENT (“ORSA”)
The ORSA enables senior management to make business decisions relating to medium term capital management
and business planning. The ORSA process is cyclical and incorporates several underlying business processes. The
full cycle is performed at least annually or more frequently if required in response to material changes in the risk
profile of the company.
The ORSA:
• Considers risks, solvency, and capital management over a three-year forward-looking horizon.
• Considers the key risks that face the business.
• Considers the link between the resulting risk profile, the approved risk appetite, and the capital
requirements.
• Includes stress and scenario testing and reverse stress testing.
The Board owns the ORSA process with the CRO being responsible for coordinating the underlying ORSA
processes and for producing an ORSA report. The underlying processes are undertaken throughout the year and
reports for each key process are produced for the Board and reviewed by the Prudential Committee. The ORSA
report, which contains the key results and conclusions of the underlying processes, is reviewed by the Risk
Committee, and reviewed and approved by the Board.
The underlying ORSA processes are undertaken alongside the relevant activity in the business. For example, the
CRO provides an opinion on the business plan, working with Finance to assess the underlying risks. Similarly, the
SCR allows for material changes in the business plan, and stress testing is performed considering the key risks to
the business. The Board seeks to hold adequate capital resources above the regulatory capital requirements.
BGIL’s capital model is used to determine adequacy thresholds and capital resources are regularly monitored,
with a plan in place should capital fall below the specified thresholds.
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BGIL SFCR 2022 SYSTEM OF GOVERNANCE 26
B.4 INTERNAL CONTROL SYSTEM
B.4.1 INTERNAL CONTROLS FRAMEWORK
BGIL has an internal controls framework designed to provide assurance that business objectives, including good
customer outcomes and compliance with regulations, are met.
The three lines of defence model (Section B.3.2) is used within the controls framework as follows:
• The first line develops controls and performs a control self-assessment. The Risk team also develops
and attests to controls that relate specifically to its areas of responsibility.
• The Risk Function also provides a second line of defence by:
o Coordinating control related activities and implementing the controls framework.
o Supporting the first line in developing their controls and providing oversight of first line control
self-assessments.
o Managing the second line review of controls and performing gap analyses of all controls
against regulatory frameworks.
o Performing control effectiveness reviews.
• Internal Audit are responsible for a third line review of controls.
Governance over the internal control framework is achieved through:
• The Management Conduct & Risk Committee:
o Responsible for ensuring that effective risk management processes are in place within the first
line to manage and control the risks to which the business is exposed.
o Responsible for reviewing controls reports and ensuring the completeness and effectiveness
of the control environment.
• The Prudential Committee: responsible for monitoring and managing the performance of financial
controls.
• The Risk & Compliance Committee: support the Prudential Committee with monitoring the output of
BGIL controls.
• The Risk Committee:
o Overarching responsibility for the design, maintenance and improvements to the internal
control framework.
o Responsible for oversight of the effectiveness of key controls across the business, including
the operation of an integrated assurance plan.
B.4.2 COMPLIANCE FUNCTION
The CRO is responsible for leading the Solvency II Compliance Function. Activities of the Compliance Function
include:
• Ensuring ongoing prudential compliance.
• Horizon scanning activity.
• Managing the relationship with the PRA.
BGIL outsources conduct-related compliance to the Group Ethics & Compliance Function, which is responsible
for:
• Developing, implementing and communicating the ethics & compliance FCA strategy, structure and
process.
• Escalating any FCA compliance matters to BGIL, reporting to the Board and other relevant stakeholders.
• FCA relations and notifications.
• FCA/PRA applications, amendments and withdrawals.
The Risk and Compliance Functions report to the Risk Committee. The effectiveness of the Risk and Compliance
Functions is periodically audited by Internal Audit.
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BGIL SFCR 2022 SYSTEM OF GOVERNANCE 27
B.5 INTERNAL AUDIT FUNCTION
Internal Audit services for BGIL are performed by the Group Internal Audit Function with a BGIL dedicated
internal audit lead. The scope of internal auditing encompasses, but is not limited to, the examination and
evaluation of the adequacy and effectiveness of the governance and internal control processes in relation to
defined goals and objectives. Internal Audit is responsible for reporting significant risk exposures and control
issues identified to the Audit Committee, including certain fraud risks, governance issues, and other matters
needed or requested by the Audit Committee.
To provide for the independence of Internal Audit, its employees report to the Group Chief Risk and Audit
Officer, who reports functionally to the Chair of the Group Audit Committee and administratively to the Group
Chief Financial Officer. The operating budget for Internal Audit is prepared according to standard Group
guidelines as part of the Group’s operating plan process. The Group Audit Committee has ultimate approval over
the budget. Internal Audit follows all standard Group processes (e.g., delegation of authority) and adheres to all
Group policies.
B.6 ACTUARIAL FUNCTION
The Actuarial Function undertakes those tasks required by Solvency II. An Actuarial Function report is produced
annually for the Board which describes the tasks undertaken by the Actuarial Function over the year, provides
recommendations, and includes opinions on technical provisions, the underwriting policy and the reinsurance
policy.
The Actuarial Function is led by the Chief Actuary (SMF20). Actuarial Function responsibilities are conducted
independently of the revenue generating functions of BGIL. The Chief Actuary reports to the Chief Executive
Officer with direct escalation routes to the Chair of the Risk Committee, Chair of the Audit Committee, and Chair
of the Board. At all times, the Chief Actuary has unrestricted access to relevant information and is not
constrained, controlled or unduly influenced in respect of relevant actuarial matters.
Resources in the Actuarial Function are continuously monitored to ensure that the work is carried out by persons
who have knowledge of actuarial and financial mathematics commensurate with the nature, scale and
complexity of the risks inherent in the business.
B.7 OUTSOURCING
BGIL has outsourcing arrangements for the provision of material services by third party service providers.
Material services are those which are critical to the business model or are of such importance that weakness or
failure of the services would cause detriment to customers and/or cast serious doubt upon an ability to meet
regulatory requirements. BGIL will only outsource material services to group companies. Non-material services
may be outsourced to external service providers if the services cannot be obtained in-house.
Centrica Procurement has a Financial Services Material Outsource Procedure which covers BGIL’s and BGSL’s
outsourcing arrangements and has been designed to meet relevant regulations. Services agreements between
BGIL and BGSL, and BGIL and Centrica, set out the activities undertaken by each entity. BGSL introduces business
to BGIL and undertakes sales & marketing, product design and retail pricing. In addition, some material services
are outsourced by BGIL to BGSL including claims handling & fulfilment and policy administration. Under the
terms of the services agreement, some complaints handling activity is undertaken directly by BGSL and some is
outsourced to BGSL from BGIL. Services outsourced to Group include some compliance activity (B.4.2), Treasury,
Internal Audit, Legal, and some HR and IT services.
In some circumstances, BGSL appoints external providers to fulfil services offshore. Examples include additional
breakdown call handling support in winter which is provided by a company in South Africa, and some services
such as webchat and some back-office support provided by service partners in India. Some support services that
are provided by Centrica, but are not critical to BGIL, are outsourced overseas.
The Risk Function, Board Risk Committee and Board (B.1) ensure that risks relating to outsourced services are
actively monitored and managed.
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BGIL SFCR 2022 SYSTEM OF GOVERNANCE 28
B.8 ANY OTHER INFORMATION
B.8.1 ADEQUACY OF SYSTEM OF GOVERNANCE
The system of governance is considered appropriate having regard to the nature, scale and complexity of the
risks inherent in the business.
B.8.2 BOARD DIVERSITY POLICY
The Board ensures diversity in recruitment processes and actively promotes diversity at all levels in the business
through its Diversity Policy. Throughout the appointment process of board members, due regard is given to
ensuring fairness and diversity through consideration of skills, experiences, and competencies. The recruitment
process complies with Group HR recruitment processes and the Centrica UK Diversity, Respect and Inclusion
Policy.
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BGIL SFCR 2022 RISK PROFILE 29
C RISK PROFILE
(Unaudited)
BGIL’s risk profile is a key driver of the SCR. The following chart shows the risk profile in 2022 and in the previous
reporting period.
The assessments above are forward-looking and based on pre-diversification across risk-type figures and relate
to BGIL’s SCR. Note that liquidity risk (Section C.4) and other risks (Section C.6) are not part of the SCR calculation
and so are excluded.
BGIL’s operational risk is comparatively large. This is mainly because BGIL’s underwriting risk is relatively low
due to the quick settlement of claims at a fixed unit cost per claim. BGIL also has very low market risk due to its
conservative investment strategy (C.2).
BGIL is exposed to material risk concentrations as follows:
• Product concentration (underwriting risk): BGIL is a mono-line insurer operating only in the UK with
large exposure to cold weather risk.
• BGIL’s outsourcing relationship with BGSL (Section B.7) creates risk concentrations in terms of
counterparty default risk (Section C.3) and operational risk (Section C.5).
Underwriting risk, 35%
Counterparty default risk , 7%
Operational risk , 56%
Market risk, 2%
2022
Underwriting risk, 36%
Counterparty default risk , 7%
Operational risk , 53%
Market risk, 3%
2021
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BGIL SFCR 2022 RISK PROFILE 30
C.1 UNDERWRITING RISK
Underwriting risk refers to fluctuations in the timing, frequency and severity of insured events relative to the
expectations of the undertaking at the time of underwriting as well as fluctuations in premium volumes relative
to the business plan.
The composition of BGIL’s underwriting risk profile is shown below. Underwriting risk is broadly stable compared
to the previous reporting period. There has been a change in portfolio composition towards more products with
an excess and a reduction in exposure due to reduced holdings offset by an increase in expected costs due to
the current high inflationary environment.
Underwriting risk is managed in accordance with BGIL’s Insurance Risk Policy and is assessed using BGIL’s internal
model. Further details about the quantification of underwriting risk are included in Section E.2.3.
BGIL’s underwriting risk consists of three main elements:
• Catastrophe risk: cold weather risk is BGIL’s main driver of underwriting risk. In cold weather, there is
an increased demand on central heating systems, leading to higher boiler breakdown rates and
therefore increased claims.
• Premium and reserve risk considers the volatility of actual claims and premiums compared to those
forecast in the business plan. In BGIL, premium and reserve risk is low due to:
o BGIL’s very short claims development tail: claims are usually reported and settled within a few
days.
o The contractual unit claims cost relationship with BGSL: BGIL pay BGSL a fixed unit cost per
claim varying by product.
o The inherent nature of the insurable risks: in most cases an engineer attends the breakdown
rather than the settlement of the claim in cash.
• Other non-life underwriting risks relate to component defect, policy wording and pricing of premiums.
BGIL has several processes and controls in place to manage underwriting risk, including:
• 12-month contract terms after which the Company is entitled to decline cover, or impose renewal terms
by amending premiums, policy excess (where applicable), or other policy terms and conditions as
appropriate.
• First visits: when a customer first purchases a central heating policy, an engineer visits their property
to assess access, safety and insurability. If the findings are adverse, then BGSL works with the customer
to address the issues, or the cover is declined. For some products where a first visit does not take place,
such as breakdown only, claims cannot be made within 14 days of policy inception.
• Annual Service Visits: primarily a health check, but the annual service visit also provides an opportunity
for the early identification of claims and is believed to mitigate underwriting risk.
Premium and
reserve risk
16%
Catastrophe risk
79%
Other non-life
underwriting
risk
5%
2022
Premium and
reserve risk
11%
Catastrophe risk
84%
Other non-life
underwriting
risk
5%
2021
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BGIL SFCR 2022 RISK PROFILE 31
C.2 MARKET RISK
C.2.1 MARKET RISK PROFILE
Market risk is the risk of loss resulting from fluctuations in the level and volatility of market prices of assets and
liabilities.
BGIL’s investment strategy is guided by its Investment Risk Policy which aims to mitigate market risk by
restricting investments to short duration, sterling-denominated high-quality securities and deposit-based
investments. As a result, market risk (calculated using the Standard Formula (Section E.2.4)) is low and has been
largely unaffected by the market volatility over 2022.
C.2.2 PRUDENT PERSON PRINCIPLE
The Prudent Person Principle, defined in Article 132 of the Solvency II Directive, includes provisions on how
undertakings should invest their assets and is as much a behavioural standard as an assessment of judgements
and investment decisions. BGIL’s investment strategy and asset allocation are set within the board-approved
risk parameters in the Investment Risk Policy. The Prudential Committee reviews and monitors the key risk
indicators for the investments.
C.3 CREDIT RISK
Credit risk is defined as the risk of loss resulting from fluctuations in the credit standing of issuers of securities,
counterparties and any debtors to which BGIL is exposed.
C.3.1 COUNTERPARTY DEFAULT RISK
The exposure to counterparty default risk arises due to BGIL’s relationship with BGSL. Since BGSL collects
premiums from customers on behalf of BGIL, the insolvency of BGSL could result in premiums not being paid to
BGIL.
A services agreement exists between BGIL and BGSL, which governs the relationship and sets out the business
model interactions. Under this contract:
• BGSL pays premiums to BGIL.
• BGIL pays BGSL for each service visit or repair.
• BGIL pays BGSL commission for its role in selling and administering insurance policies on BGIL’s behalf,
including profit commission based on the profitability of business introduced to the Company.
• The intercompany balance is the difference between the amount payable to BGIL from BGSL and that
payable from BGIL to BGSL.
Several processes are in place to mitigate BGIL’s exposure to counterparty default risk, including:
• The services agreement requires intercompany balance payments to be made monthly to limit
exposure to a maximum of one month’s debt.
• A trust arrangement has been set up, to which premiums must be diverted in the event of BGSL default.
Counterparty default risk exposure reduced in 2022. The risk is managed in accordance with BGIL’s Counterparty
Default Risk Policy and is assessed using BGIL’s partial internal model (Section E.2.5).
C.3.2 OTHER CREDIT RISK
The only material exposure to credit risk is from BGSL, as described above. Exposure to credit risk on assets and
liabilities on the balance sheet is not material. BGIL does not have any outwards reinsurance and has not
transferred any risk to special purpose vehicles.
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 RISK PROFILE 32
C.4 LIQUIDITY RISK
Liquidity risk is being unable to realise investments and other assets to settle financial obligations when they fall
due.
Liquidity risk for BGIL is low and is managed in accordance with BGIL’s Liquidity Policy. Liquidity risk is mitigated
through investment in highly liquid financial assets and has not been adversely impacted by the pandemic.
Expected Profit in Future Premium (EPIFP), calculated in accordance with Article 260(2) of the Solvency II
Delegated Act, amounted to £11.1m (£23.1m in 2021) on 31 December 2022.
C.5 OPERATIONAL RISK
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, systems or
external events. It also includes conduct risks and regulatory risks.
A consequence of BGIL’s relationship with BGSL (Section B.7) is that many of BGIL’s operational risks are derived
from BGSL activities. Conduct risk is the main driver of BGIL’s operational risk capital requirement. This relates
to the risk that poor customer outcomes may lead to premium refunds, higher lapses, a reduction in new
business and/or additional remediation costs.
Over 2022, BGI continued to drive and monitor embedding of the conduct risk framework. Oversight is via the
common Board and sub-committees, as well as through the services agreement. The services agreement sets
out the activities undertaken by each entity and limits BGIL’s financial exposure in the event BGSL fails to
adequately perform the activities for which it is responsible.
As with all companies that hold customer data, BGIL is exposed to cyber risk. There is an increase in the
sophistication of external threats in general and with home working of office-based staff as a result of the
pandemic. This has been mitigated by activity to improve resilience. To date, there have not been any material
losses due to cyber events. Cyber risk is closely monitored and managed, particularly with regards to the loss of
key IT systems and data protection.
The FCA/PRA Operational Resilience requirements are being implemented in the business up to the end of the
FCA set transition phase end date of March 2025, including setting tolerance levels for the HomeCare products.
BGSL is working alongside BGIL to implement the FCA’s new Consumer Duty requirements with a focus on
continuing to provide good outcomes for our insurance customers.
BGIL continues to monitor other upcoming regulatory developments including Customer Duty and the review of
Solvency II. BGIL holds capital to fund potential losses arising from operational events. Operational risk is
managed in accordance with the BG Insurance Operational Risk Policy and is assessed using BGIL’s partial
internal model (E.2.6).
C.6 OTHER MATERIAL RISKS
Group Risk
The British Gas brand has a high profile in the UK consumer markets and BGIL has potential exposure to brand
damage contagion caused by other parts of the Group or the energy market in general. The principal direct
impact of British Gas brand damage to BGIL would be a reduction in business volumes through a loss of existing
business.
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 RISK PROFILE 33
C.7 ANY OTHER INFORMATION
C.7.1 ENERGY CRISIS
The UK wholesale gas and electricity prices have increased at unprecedented levels over the last year which has
led to increases in energy bills for customers, as well as supplier failure. Centrica, British Gas’ parent company,
operate a robust risk management approach and energy price hedging programme to safeguard against such
unforeseen increase in prices. Consequently, Centrica Group and British Gas have remained financially resilient.
There has been no direct financial or operational impact on BGIL to date.
C.7.2 COST OF LIVING CRISIS AND HIGH INFLATION
BGIL exposure to sudden high inflation pressure is limited via a contractual agreement with BGSL under which
costs are fixed for a period of time, typically one year. Customer retention levels on core products remain strong.
BGIL is monitoring the impact of the cost of living crisis.
C.7.3 CLIMATE CHANGE RISK
The Bank of England has identified two key risks relating to climate change:
• Physical risks such as extreme weather events:
o BGIL includes a 1-in-200 cold weather scenario in its SCR and considers more extreme weather
events as part of its stress and scenario testing.
• Transition risks arising from a move to a greener economy which could lead to a large fall in asset values
in some sectors, or a higher cost of doing business:
o There is a risk to the market within which BGIL operates, from a potential move from gas to
other forms of energy such as electrification.
o BGIL invests in short duration, high-quality fixed interest securities and deposit-based
investments so is less exposed to transition risks through its asset strategy.
BGIL has embedded the management of climate change risk into its risk management framework.
It has a Board-approved risk appetite statement for climate change and has undertaken some scenario testing
in this area. Climate change is an area of management and regulatory focus, and as such, BGIL’s work in this area
continues to evolve.
C.7.4 IFRS 17
IFRS 17 is an International Financial Reporting Standard that was issued by the International Accounting
Standards Board in May 2017. It will replace IFRS 4 on accounting for insurance contracts and has an effective
date of 1 January 2023.
Based upon the impact assessment performed, BGIL will not be impacted and do not expect IFRS 17 to have a
significant financial or operational impact on the Centrica Group. By applying the Premium Allocation Approach
(PAA) and making specific policy decisions, together with good granularity of data from existing systems the
impact of the change from IFRS 17 can be minimised and can align large parts of the existing accounting to IFRS
17 measurement.
C.7.5 BREXIT
Brexit has had a limited impact as the Company does not export products and services to EU countries, nor does
it have material exposure to currency or interest rate risks.
BGIL’s highly liquid assets and low-risk investment strategy ensure that BGIL is resilient to an unexpected
economic downturn. Over the longer term, a prolonged period of uncertainty and a dampened economy may
have an adverse impact on sales and growth. BGIL continues to carefully monitor economic developments.
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 RISK PROFILE 34
C.7.6 SENSITIVITY ANALYSIS
The following table shows some sensitivities for the most material risks, assuming that each sensitivity occurs in
isolation, with no other changes.
A one-notch downgrade in the credit rating assumed for BGSL would not have a material impact on the SCR, and
sensitivity analysis is not presented for market risk since it is a small proportion of BGIL’s overall risk profile.
C.7.7 STRESS AND SCENARIO TESTING
Stress and scenario testing is part of BGIL’s risk management process and is used to evaluate its financial position
under severe but plausible events. Its value lies in enhancing management understanding of the financial
vulnerability and viability of BGIL.
Stress and scenario testing is conducted at various times throughout the year to assist with risk-based decision
making. The analysis undertaken highlights that while there is profit exposure to several emerging themes, such
as adverse customer purchasing behaviour resulting from rising inflation and costs, BGIL continues to be
profitable under these scenarios with a robust solvency coverage ratio. These risks are closely monitored.
BGIL has a financial recovery framework and plan which defines roles and responsibilities and sets out the
management options that could be taken in times of stress to facilitate the recovery of BGIL’s own funds.
C.7.8 REVERSE STRESS TESTING
BGIL also undertakes reverse stress testing which considers circumstances that would render BGIL’s business
model inviable, thereby identifying potential business vulnerabilities. Reverse stress testing starts from an
outcome of business failure and identifies potential circumstances which might trigger this. This includes the
extreme risks which are usually dismissed on the basis that they are very unlikely to happen and is different to
general stress and scenario testing which assesses outcomes arising from changes in circumstances.
Reverse stress testing affirms the very low likelihood of BGIL becoming inviable. The potential causes of
inviability were explored and such causes, while not impossible, are judged implausible given the nature of
BGIL’s business and risk profile.
Risk Type Sensitivity
Impact on SCR for
risk type
Impact on overall
SCR
Cold weather (catastrophe
underwriting risk)
Increasing cold weather exposure
by 10%
10% 4%
Operational risk
Increasing the number of
premium refunds within product
risk by 30%
11% 6%
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 VALUATION FOR SOLVENCY PURPOSES 35
D VALUATION FOR SOLVENCY PURPOSES
(Audited)
The Company’s annual financial statements are prepared under UK GAAP. The balance sheet on a UK GAAP
basis and the Solvency II basis is shown below.
Units in collective investment undertakings are available for sale and are recorded on the balance sheet at fair
value. The UK GAAP valuation is consistent with Solvency II requirements, so there is no difference between the
two bases.
Under Solvency II, UK GAAP unearned premium provision, deferred acquisition costs and insurance debtors and
creditors that are not past due are removed from the balance sheet and replaced with Solvency II provisions,
such as premium provisions and risk margin. The difference between UK GAAP and Solvency II gives rise to a
reconciliation reserve to which deferred tax is applied at the prevailing rate. Further detail on the calculation of
technical provisions is included in Section D.2.
2022 2022 2022 2021 2021 2021
UK GAAP SII Difference UK GAAP SII Difference
value value value value
£m £m £m £m £m £m
Assets
Deferred acquisition costs 237.8 0.0 (237.8) 242.6 0.0 (242.6)
Investments
Collective investment undertakings 147.9 147.9 0.0 152.4 152.4 0.0
Insurance &intermediaries receivables 440.6 0.0 (440.6) 466.3 0.0 (466.3)
Cash and cash equivalents 0.1 0.1 0.0 0.1 0.1 0.0
Any other assets, not elsewhere shown 1.4 0.0 (1.4) 1.1 0.0 (1.1)
Total assets 827.8 148.1 (679.7) 862.4 152.5 (709.9)
Liabilities
Technical provisions (460.0) (10.0) 450.0 (480.6) 11.1 491.8
Deferred tax liabilities 0.0 (2.5) (2.5) 0.0 (4.1) (4.1)
Insurance &intermediaries payables (240.5) 0.0 240.5 (239.8) 0.0 239.8
Any other liabilities, not elsewhere shown (27.8) (27.8) 0.0 (31.7) (31.7) 0.0
Total liabilities (728.3) (40.3) 688.0 (752.1) (24.7) 727.5
Excess of assets over liabilities/own funds 99.5 107.8 8.3 110.3 127.8 17.5
Balance sheet as at 31 December
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 VALUATION FOR SOLVENCY PURPOSES 36
D.1 ASSETS
D.1.1 VALUE OF ASSETS
There has been no material change in investment holdings.
D.1.2 BASIS OF VALUATION
Collective investment undertakings comprise units in short term money market funds. They are classed as low
volatility net asset value (LVNAV) funds working within a very narrow bid and offer spread. Units in the funds
are valued at the quoted market price at 31 December.
The cash and cash equivalents balance represent fair value on demand balances with financial institutions. All
investments are denominated in sterling.
D.2 TECHNICAL PROVISIONS
D.2.1 VALUE OF TECHNICAL PROVISIONS
The technical provisions as of 31 December 2021 was a negative liability of £11.1m, compared to a liability of
£10.0m at year-end 2022.
Claims provisions have increased from 2021 due to a period of exceptional cold weather in December 2022.
Premium provisions are a negative liability reflecting the expectation that bound business at 31 December 2022
will be profitable and that customers pay the premium by instalments. Premium provisions have increased over
the year primarily driven by a change in the costs payable under the contractual services agreement with BGSL.
D.2.2 BASIS OF VALUATION
Technical provisions are defined as the discounted probability-weighted average of future cash flows.
Discounting is based on PRA’s risk free rate but has minimal impact for BGIL. Technical provisions consist of
claims provisions, premiums provisions and a risk margin.
Claims Provisions
Claims provisions are the discounted best estimate of all future cashflows relating to claims events prior to the
valuation date.
Claims provisions consist of outstanding claims, IBNR and the intercompany balance payable to BGSL at the year-
end. Outstanding claims are based on claims volumes outstanding and contractual amounts due at the valuation
date. IBNR relates to estimated claims that have occurred but have not yet been notified. Information on the
intercompany balance is included in Section C.3.1. Given the short-tailed nature of claims, there is no allowance
for ENID within claims provisions.
2022 2021
£m £m
Collective investment undertakings 147.9 152.4
Cash and cash equivalents 0.1 0.1
Total assets 148.0 152.5
Assets as at 31 December
2022 2021
£m £m
Premium provisions (2.7) (15.6)
Claims provisions 8.3 (0.1)
Best estimate liabilities 5.6 (15.7)
Risk margin 4.4 4.6
Technical provisions 10.0 (11.1)
Non-life technical provisions as at 31 December
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 VALUATION FOR SOLVENCY PURPOSES 37
Premium Provisions
Premium provisions are the discounted best estimate of all future cashflows relating to future exposure arising
from policies for which BGIL has an obligation at the valuation date.
BGIL has used a simplified method to determine its premium provision, proportionate to underlying risks and
taking account of Article 56 [Proportionality] of the Solvency II Delegated Act.
Business plan loss ratios are used to calculate expected future cash flows regarding policies in force. Allowance
is also made for BBNI policies which have not been incepted at the valuation date but for which BGIL has an
obligation to provide insurance cover, such as issued renewals. A deduction is made for mid-term cancellations
on in-force policies and renewal lapses on policies invited but not taken up.
The premium provisions include an allowance for ENID, which is based on a consideration of adverse scenarios.
Risk Margin
The risk margin increases the overall value of the technical provisions from the discounted best estimate to an
amount equivalent to a theoretical level needed to transfer the obligations to another insurance undertaking.
The risk margin is estimated by applying a 6% (determined by PRA) cost of capital charge to the sum of the
present value of the entire projected SCR in each future year of exposure. Solvency II allows the use of a partial
SCR in the calculation, but the use of the full SCR is considered to be appropriate and proportionate given BGIL’s
risk profile.
Expenses
Solvency II requires all future expenses incurred in fulfilling existing insurance contracts to be taken into account.
The table below illustrates the types of expenses included in claims and premium provisions.
Expense Type
Claims provisions
Premium provisions
Administration
✓
Claims management
✓
✓
Acquisition
✓
D.2.3 MATERIAL CHANGES TO ASSUMPTIONS
There have been no material changes to assumptions.
D.2.4 UNCERTAINTY
The Actuarial Function calculate the uncertainty in the technical provisions. The short tail and stable nature of
BGIL’s insurance activities results in low levels of both absolute technical provisions and their uncertainty.
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 VALUATION FOR SOLVENCY PURPOSES 38
D.3 OTHER LIABILITIES
D.4 ALTERNATIVE METHODS FOR VALUATION
Alternative methods of valuation for assets and liabilities permitted under EIOPA Delegated Act Article 296(4)
are not applied.
D.5 ANY OTHER INFORMATION
BGIL does not use the following adjustments:
• The matching adjustment referred to in Article 77b of the Solvency II Directive.
• The volatility adjustment referred to in Article 77d of the Solvency II Directive.
• The transitional risk-free interest rate term structure referred to in Article 308c of the Solvency II
Directive.
• The transitional deduction referred to in Article 308d of the Solvency II Directive.
BGIL has no reinsurance contracts and does not use special purpose vehicles and has no recoverable from these
arrangements.
2022 2021
£m £m
Insurance premium tax (IPT) 25.8 27.6
Corporation tax 0.5 2.3
Sundry accruals 0.8 1.1
Other creditors 0.7 0.7
Any other liabilities, not elsewhere shown 27.8 31.7
Other liabilities as at 31 December
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 CAPITAL MANAGEMENT 39
E CAPITAL MANAGEMENT
(E1, E5, E6: audited, E2 – E4: unaudited)
E.1 OWN FUNDS
BGIL’s objective is to maintain appropriate levels of capital to meet claims as they fall due, protect the interests
of customers and meet operating needs and regulatory requirements.
E.1.1 SUMMARY OF OWN FUNDS
Eligible own funds represent Solvency II net assets less foreseeable dividends approved by the Board, but not
paid at 31 December. The Solvency II reconciliation reserve represents own funds less share capital and
foreseeable dividends.
The analysis of change of own funds over the year is as follows:
In 2022, although BGIL was financially resilient, the Board took into account the uncertainties arising from the
cost of living crisis and agreed to defer further dividend payments until later in the year when there was clarity
in the external economic environment.
BGIL paid an interim dividend of £30m in October 2022. The company is financially resilient.
All own funds at 31 December 2022 and 31 December 2021 met the criteria to be classified as Tier 1 unrestricted
basic own funds, as set out in Article 71 of the Solvency II Delegated Act:
• The own funds are immediately available to absorb losses.
• They are undated so there is no obligation for repayment.
• Dividends are approved by the Board and can be cancelled at any time prior to payment.
• There are no mandatory servicing costs.
There are no significant restrictions affecting the availability and transferability of own funds within BGIL.
All eligible own funds are available to cover the SCR (Section E.2.7) and the MCR (Section E.2.8).
2022 2021
£m £m
Excess of assets over liabilities (section D) 107.8 127.8
Foreseeable dividends 0.0 0.0
Eligible own funds (tier 1) 107.8 127.8
Of which:
Ordinary share capital (fully paid) 5.0 5.0
Reconciliation reserve 102.8 122.8
Own funds at 31 December
2022 2021
£m £m
Own funds at start of year 127.8 116.3
Foreseeable dividend 0.0 0.0
Eligible own funds at start of year 127.8 116.3
Increase in own funds during the year 10.0 60.5
Dividend paid (30.0) (49.0)
Foreseeable dividend 0.0 0.0
Eligible own funds at end of year 107.8 127.8
Analysis of change of own funds
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 CAPITAL MANAGEMENT 40
E.1.2 CAPITAL MANAGEMENT POLICY
A business plan is prepared at least annually. Monthly actual positions are reported against the plan. Forecast
updates are prepared in the event of any significant deviation from the plan or material changes in business
strategy.
Capital resources are managed in accordance with the Capital Management Policy, which is reviewed by the
Board on an annual basis. The key objective is to maintain sufficient own funds to safeguard the Company’s
ability to continue as a going concern and to protect the interests of customers, investors and regulators while
also efficiently deploying own funds and managing risk to sustain ongoing business development. Own funds are
regularly monitored, and management intervention and actions are required at particular thresholds.
BGIL’s approach at year-end is to distribute audited and approved own funds in excess of capital risk appetite to
its parent company, subject to ongoing business performance being within risk appetite, specific requirements
as detailed in BGIL’s Dividend Policy, and other relevant factors. Funds in excess of BGIL’s capital risk appetite
may be distributed at other times throughout the year in accordance with BGIL’s Dividend Policy and following
Board approval.
E.1.3 DIFFERENCE BETWEEN EQUITY IN FINANCIAL STATEMENTS AND EXCESS OF ASSETS OVER LIABILITIES
The following table shows the differences between the equity in the financial statements, calculated on a UK
GAAP basis, and the excess of assets over liabilities (own funds) calculated on a Solvency II basis.
E.1.4 ANY OTHER INFORMATION
There are no basic own fund items subject to the transitional arrangements referred to in Articles 308b(9) and
308b(10) of the Solvency II Directive.
BGIL does not have any ancillary own funds.
There are no significant restrictions affecting the availability and transferability of own funds within the
undertaking.
2022 2021
£m £m
Equity in the financial statements/shareholders funds 99.5 110.3
Remove UK GAAP insurance balances 12.4 10.7
Add Solvency II balances:
Premium provisions 2.8 15.6
Risk margin (4.4) (4.6)
Tax on reconciliation reserve (2.5) (4.1)
Excess of assets over liabilities/own funds 107.8 127.8
Foreseeable dividend 0.0 0.0
Eligible own funds (tier 1) 107.8 127.8
UK GAAP to SII as at 31 December
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 CAPITAL MANAGEMENT 41
E.2 SOLVENCY CAPITAL REQUIREMENT AND MINIMUM CAPITAL REQUIREMENT
The SCR represents the level of eligible own funds required to provide assurance that the Company can absorb
significant losses in 1-in-200 year scenarios and still meet policyholders’ claims costs and other obligations as
they fall due.
E.2.1 PARTIAL INTERNAL MODEL
BGIL calculates its SCR using a partial internal model. The internal model is used for insurance risk, operational
risk and counterparty risk, with the Standard Formula used for market risk and aggregation across risk types.
Uses
The partial internal model is also used in the ongoing management of the business including:
• For capital management purposes including determining the level of dividends and defining an
appropriate solvency capital margin.
• In the ORSA process and report.
• To assess reinsurance requirements (currently, no reinsurance is purchased).
• In stress and scenario testing and reverse stress testing.
Method
The separate risk modules of the model use different methods for the calculation of the probability distribution
forecast as follows:
• Underwriting risk:
o Catastrophe (cold weather) risk: Met Office temperature data and company-specific demand
data, together with predictive modelling techniques, are used to create an empirical
temperature-demand distribution from which a probability distribution is created.
o Premium and reserve risk: attrition claims frequency is modelled stochastically.
• Operational risk: several scenarios at various return periods are considered and used to create a
probability distribution.
• Counterparty default risk uses a stochastic model based on internal and external data.
Time Period
Solvency II requires firms to calculate the SCR over the following 12 months (Article 101 of the Solvency II
Directive). Alternative methods are possible under Article 122. For BGIL, a bespoke model is used to provide
sufficient protection to policy holders in accordance with Article 122 and as approved by the PRA.
Data
The model uses data from various internal and external sources including:
• Business plan.
• Met Office temperature data.
• Event loss data.
• Debt default and recovery rates.
The data is handled in accordance with BGIL’s Data Quality Policy which ensures that relevant data is accurate,
complete, and appropriate, enabling BGIL to effectively manage its business and to meet regulatory and
statutory obligations, including Solvency II data quality standards.
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 CAPITAL MANAGEMENT 42
E.2.2 OVERALL SCR
The table below shows BGIL’s SCR for each risk module.
There is a non-material decrease in the SCR primarily due to fewer policies in force at year-end 2022 compared
to year-end 2021. Further information is included in sections 0 to E.2.6.
No capital add-on is applied to the SCR.
E.2.3 UNDERWRITING RISK
Underwriting risk has been reduced primarily due to a reduction in exposure.
Premium and reserve risk is net of a profit offset. Further information about underwriting risk is included in
Section 0.
E.2.4 MARKET RISK
Market risk is calculated using the Standard Formula as it is considered to fairly reflect BGIL’s risk profile and
capital requirement. No material simplifications permitted in the Standard Formula have been used.
Reduction in Concentration risk driven by the number of counterparties where BGIL has greater than 3%
exposure in has decreased for roughly the same total exposure. BGIL’s investments are all sterling-denominated
and so there is no currency risk.
2022 2021
£m £m
Non-life underwriting risk 26.2 28.2
Market risk 1.4 2.7
Counterparty default risk 4.9 5.8
Operational risk 41.6 41.1
Diversification (3.2) (4.4)
Total SCR 71.0 73.4
Solvency Capital Requirement as at 31 December
2022 2021
£m £m
Premium and reserve risk 5.9 4.3
Catastrophe risk 28.5 32.4
Other non-life underwriting risk 1.8 2.0
Diversification (10.0) (10.5)
Total underwriting risk 26.2 28.2
Underwriting risk as at 31 December
2022 2021
£m £m
Interest rate risk 0.4 0.2
Spread risk 0.2 0.2
Concentration risk 1.4 2.7
Diversification (0.5) (0.4)
Total market risk 1.4 2.7
Market risk as at 31 December
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Solvency and Financial Condition Report 2022
BGIL SFCR 2022 CAPITAL MANAGEMENT 43
E.2.5 COUNTERPARTY DEFAULT RISK
The table below shows that counterparty default risk has slightly decreased. Further information about
counterparty default risk is included in Section C.3.
E.2.6 OPERATIONAL RISK
Operational risk capital has slightly increased by £0.4m driven by updated stresses for the scenarios
Further information about operational risk is included in Section C.5.
E.2.7 RATIO OF ELIGIBLE OWN FUNDS TO SCR
The decrease in SCR ratio of 22 percentage points is due to £30m dividend payments in October 2022 and
reduced underwriting performance therefore reducing own funds are held at year end.
BGIL’s own funds remain in appetite and above its target threshold.
2022 2021
£m £m
Total counterparty default risk 4.9 5.8
Counterparty default risk (credit risk) as at 31 December
2022 2021
£m £m
Total operational risk 41.6 41.1
Operational risk as at 31 December
2022 2021
£m £m
Eligible own funds (tier 1) 107.8 127.8
Solvency Capital Requirement 71.0 73.4
Solvency II surplus 36.8 54.4
Ratio of eligible own funds to SCR 152% 174%
Solvency II surplus as at 31 December
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 CAPITAL MANAGEMENT 44
E.2.8 MINIMUM CAPITAL REQUIREMENT
BGIL is required to report the MCR, which is a regulatory figure representing the absolute minimum level below
which own funds should not fall. While the SCR is driven by a bespoke, PRA-approved model designed to reflect
BGIL’s risk profile, the MCR calculation is a linear formula based on GWP and technical provisions and is subject
to a defined floor of 25% of SCR and a cap of 45% of SCR. As such, caution needs to be exercised when comparing
with BGIL’s SCR, or with the MCR of other companies. The MCR (capped at 45% of SCR) and capital coverage of
the MCR is shown below. All of BGIL’s own funds are classed as Tier 1 and are therefore available to meet the
MCR.
E.3 USE OF THE DURATION-BASED EQUITY RISK SUB-MODULE IN THE CALCULATION OF THE SCR
The duration-based equity risk sub-module in the calculation of the SCR is not used.
2022 2021
£m £m
Eligible own funds (tier 1) 107.8 127.8
MCR 31.9 33.1
Ratio of eligible own funds to MCR 338% 387%
Capital coverage of MCR as at 31 December
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Solvency and Financial Condition Report 2022
BGIL SFCR 2022 CAPITAL MANAGEMENT 45
E.4 DIFFERENCES BETWEEN THE STANDARD FORMULA AND PARTIAL INTERNAL MODEL
The following table shows how BGIL’s SCR calculated using the PRA-approved partial internal model compares
with the calculation using the Standard Formula. Non-life underwriting risk calculated using the Standard
Formula has decreased due to a reduction in gross earned premium compared to the previous year.
The Standard Formula for underwriting risk produces a capital requirement higher than under BGIL’s internal
model due to material differences in the assumptions used by PRA in the Standard Formula and those used in
BGIL’s internal model. The internal model better reflects BGIL’s low underwriting risk characterised by the short
tail nature of the business and contractually fixed unit claims costs.
Counterparty default risk calculated using the Standard Formula is negligible and does not adequately reflect
BGIL’s business relationship with BGSL. Under the Standard Formula calculation, operational risk capital is based
on gross earned premium at the year-end and does not adequately reflect BGIL’s risk profile. BGIL’s partial
internal model uses the Standard Formula to calculate market risk as this is considered to fairly reflect BGIL’s
risk profile. No material simplifications have been made, and BGIL does not use any undertaking-specific
parameters within the Standard Formula calculation.
E.5 NON-COMPLIANCE WITH THE MCR AND NON-COMPLIANCE WITH THE SCR
BGIL has maintained sufficient own funds to meet both the SCR and the MCR throughout the reporting period.
E.6 ANY OTHER INFORMATION
There is no other material information to report.
2022 2022 2022 2021 2021 2021
Standard
Formula
Partial
Internal
Model
Difference
Standard
Formula
Partial
Internal
Model
Difference
£m £m £m £m £m £m
Non-life underwriting risk 167.1 26.2 (140.9) 180.7 28.2 (152.5)
Market risk 1.4 1.4 0.0 2.7 2.7 0.0
Counterparty default risk 0.0 4.9 4.9 0.0 5.8 5.8
Diversification (1.1) (3.2) (2.1) (2.0) (4.4) (2.4)
Basic solvency capital requirement 167.5 29.4 (138.1) 181.4 32.3 (149.1)
Operational risk 25.6 41.6 15.9 27.2 41.1 13.9
Solvency Capital Requirement 193.1 71.0 (122.1) 208.6 73.4 (135.2)
Comparison with Standard Formula
as at 31 December
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 GLOSSARY 46
F GLOSSARY
Term
Meaning within document
BBNI
Bound But Not Incepted
BGIL or the Company
British Gas Insurance Limited
BGSL
British Gas Services Limited
COR
Combined Operating Ratio
CRO
Chief Risk Officer
EIOPA
European Insurance and Occupational Pensions Authority
ENID
Events Not in Data
EPIFP
Expected Profit in Future Premium
FCA
Financial Conduct Authority
GBGH
GB Gas Holdings Limited
GWP
Gross Written Premium
IBNR
Incurred But Not Reported
MCR
Minimum Capital Requirement
ORSA
Own Risk and Solvency Assessment
PRA
Prudential Regulation Authority
SCR
Solvency Capital Requirement
Solvency II Directive
Directive 2009/138/EC of the European Parliament and of the Council
Solvency II Delegated Act
Commission Delegated Regulation (EU) 2015/35
UK GAAP
UK Generally Accepted Accounting Practice
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES 47
G APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES
British Gas Insurance
Limited
Solvency and Financial
Condition Report
Disclosures
31 December
2022
(Monetary amounts in GBP thousands)
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES 48
General information
Undertaking name British Gas Insurance Limited
Undertaking identification code 213800QKXD83EEO79W25
Type of code of undertaking LEI
Type of undertaking Non-life undertakings
Country of authorisation GB
Language of reporting en
Reporting submission date 2023-04-08
Financial year end 2022-12-31
Reporting reference date 2022-12-31
Regular/Ad-hoc submission Regular reporting
Currency used for reporting GBP
Accounting standards Local GAAP
Method of Calculation of the SCR Partial internal model
Use of undertaking specific parameters Don’t use undertaking specific parameters
Ring-fenced funds Not reporting activity by RFF
Matching adjustment No use of matching adjustment
Volatility adjustment No use of volatility adjustment
Transitional measure on the risk-free interest rate No use of transitional measure on the risk-free interest rate
Transitional measure on technical provisions No use of transitional measure on technical provisions
Initial submission or re-submission Initial submission
Exemption of reporting ECAI information Not exempted
List of reported templates
S.02.01.01 - Balance sheet
S.05.01.01 - Premiums, claims and expenses by line of business
S.05.02.01 - Premiums, claims and expenses by country
S.17.01.02 - Non-Life Technical Provisions
S.19.01.21 - Non-Life insurance claims
S.23.01.01 - Own Funds
S.25.02.01 - Solvency Capital Requirement - for undertakings using the standard formula and partial internal model
S.28.01.01 - Minimum Capital Requirement - Only life or only non-life insurance or reinsurance activity
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES 49
S.02.01.01
Balance sheet
Solvency II
value
Assets C0010
R0010 Goodwill
R0020 Deferred acquisition costs
R0030 Intangible assets
R0040 Deferred tax assets
R0050 Pension benefit surplus
R0060 Property, plant & equipment held for own use 0.00
R0070 Investments (other than assets held for index-linked and unit-linked contracts) 147,925,135.16
R0080 Property (other than for own use) 0.00
R0090 Holdings in related undertakings, including participations 0.00
R0100 Equities 0.00
R0110 Equities - listed
R0120 Equities - unlisted
R0130 Bonds 0.00
R0140 Government Bonds 0.00
R0150 Corporate Bonds 0.00
R0160 Structured notes 0.00
R0170 Collateralised securities 0.00
R0180 Collective Investments Undertakings 147,925,135.16
R0190 Derivatives
R0200 Deposits other than cash equivalents 0.00
R0210 Other investments 0.00
R0220 Assets held for index-linked and unit-linked contracts
R0230 Loans and mortgages 0.00
R0240 Loans on policies 0.00
R0250 Loans and mortgages to individuals
R0260 Other loans and mortgages
R0270 Reinsurance recoverables from: 0.00
R0280 Non-life and health similar to non-life 0.00
R0290 Non-life excluding health 0.00
R0300 Health similar to non-life 0.00
R0310 Life and health similar to life, excluding index-linked and unit-linked 0.00
R0320 Health similar to life
R0330 Life excluding health and index-linked and unit-linked
R0340 Life index-linked and unit-linked
R0350 Deposits to cedants 0.00
R0360 Insurance and intermediaries receivables
R0370 Reinsurance receivables
R0380 Receivables (trade, not insurance)
R0390 Own shares (held directly)
R0400
Amounts due in respect of own fund items or initial fund called up but not yet paid in 0.00
R0410 Cash and cash equivalents 133,593.72
R0420 Any other assets, not elsewhere shown
R0500 Total assets 148,058,728.88
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES 50
S.02.01.01
Balance sheet
Solvency II
value
Liabilities C0010
R0510 Technical provisions - non-life 10,012,779.49
R0520 Technical provisions - non-life (excluding health) 10,012,779.49
R0530 TP calculated as a whole 0.00
R0540 Best Estimate 5,577,779.49
R0550 Risk margin 4,435,000.00
R0560 Technical provisions - health (similar to non-life) 0.00
R0570 TP calculated as a whole 0.00
R0580 Best Estimate 0.00
R0590 Risk margin 0.00
R0600 Technical provisions - life (excluding index-linked and unit-linked) 0.00
R0610 Technical provisions - health (similar to life) 0.00
R0620 TP calculated as a whole
R0630 Best Estimate
R0640 Risk margin
R0650 Technical provisions - life (excluding health and index-linked and unit-linked) 0.00
R0660 TP calculated as a whole
R0670 Best Estimate
R0680 Risk margin
R0690 Technical provisions - index-linked and unit-linked 0.00
R0700 TP calculated as a whole
R0710 Best Estimate
R0720 Risk margin
R0730 Other technical provisions
R0740 Contingent liabilities
R0750 Provisions other than technical provisions
R0760 Pension benefit obligations
R0770 Deposits from reinsurers
R0780 Deferred tax liabilities 2,471,396.96
R0790 Derivatives
R0800 Debts owed to credit institutions
R0810 Financial liabilities other than debts owed to credit institutions
R0820 Insurance & intermediaries payables
R0830 Reinsurance payables
R0840 Payables (trade, not insurance) 1,972,423.28
R0850 Subordinated liabilities 0.00
R0860 Subordinated liabilities not in BOF
R0870 Subordinated liabilities in BOF 0.00
R0880 Any other liabilities, not elsewhere shown 25,806,113.33
R0900 Total liabilities 40,262,713.06
R1000 Excess of assets over liabilities 107,796,015.82
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES 51
S.05.01.01
Premiums, claims and expenses by line of business
Non-life
Medical expense
insurance
Income protection
insurance
Workers'
compensation
insurance
Motor vehicle
liability insurance
Other motor
insurance
Marine, aviation
and transport
insurance
Fire and other
damage to property
insurance
General liability
insurance
Credit and
suretyship
insurance
Legal expenses
insurance
Assistance
Miscellaneous
financial loss
Health Casualty
Marine, aviation,
transport
Property
C0010 C0020 C0030 C0040 C0050 C0060 C0070 C0080 C0090 C0100 C0110 C0120 C0130 C0140 C0150 C0160 C0200
Premiums written
R0110 Gross - Direct Business 829,059,088.31 829,059,088.31
R0120 Gross - Proportional reinsurance accepted 0.00
R0130 Gross - Non-proportional reinsurance accepted 0.00
R0140 Reinsurers' share 0.00
R0200 Net 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 829,059,088.31 0.00 0.00 0.00 0.00 0.00 829,059,088.31
Premiums earned
R0210 Gross - Direct Business 853,562,036.17 853,562,036.17
R0220 Gross - Proportional reinsurance accepted 0.00
R0230 Gross - Non-proportional reinsurance accepted 0.00
R0240 Reinsurers' share 0.00
R0300 Net 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 853,562,036.17 0.00 0.00 0.00 0.00 0.00 853,562,036.17
Claims incurred
R0310 Gross - Direct Business 357,189,806.30 357,189,806.30
R0320 Gross - Proportional reinsurance accepted 0.00
R0330 Gross - Non-proportional reinsurance accepted 0.00
R0340 Reinsurers' share 0.00
R0400 Net 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 357,189,806.30 0.00 0.00 0.00 0.00 0.00 357,189,806.30
Changes in other technical provisions
R0410 Gross - Direct Business 0.00
R0420 Gross - Proportional reinsurance accepted 0.00
R0430 Gross - Non-proportional reinsurance accepted 0.00
R0440 Reinsurers' share 0.00
R0500 Net 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R0550 Expenses incurred 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 474,879,178.38 0.00 0.00 0.00 0.00 0.00 474,879,178.38
Administrative expenses
R0610 Gross - Direct Business 0.00
R0620 Gross - Proportional reinsurance accepted 0.00
R0630 Gross - Non-proportional reinsurance accepted 0.00
R0640 Reinsurers' share 0.00
R0700 Net 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Investment management expenses
R0710 Gross - Direct Business 158,931.97 158,931.97
R0720 Gross - Proportional reinsurance accepted 0.00
R0730 Gross - Non-proportional reinsurance accepted 0.00
R0740 Reinsurers' share 0.00
R0800 Net 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 158,931.97 0.00 0.00 0.00 0.00 0.00 158,931.97
Claims management expenses
R0810 Gross - Direct Business 42,877,490.00 42,877,490.00
R0820 Gross - Proportional reinsurance accepted 0.00
R0830 Gross - Non-proportional reinsurance accepted 0.00
R0840 Reinsurers' share 0.00
R0900 Net 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 42,877,490.00 0.00 0.00 0.00 0.00 0.00 42,877,490.00
Acquisition expenses
R0910 Gross - Direct Business 423,188,950.00 423,188,950.00
R0920 Gross - Proportional reinsurance accepted 0.00
R0930 Gross - Non-proportional reinsurance accepted 0.00
R0940 Reinsurers' share 0.00
R1000 Net 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 423,188,950.00 0.00 0.00 0.00 0.00 0.00 423,188,950.00
Overhead expenses
R1010 Gross - Direct Business 8,653,806.41 8,653,806.41
R1020 Gross - Proportional reinsurance accepted 0.00
R1030 Gross - Non-proportional reinsurance accepted 0.00
R1040 Reinsurers' share 0.00
R1100 Net 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 8,653,806.41 0.00 0.00 0.00 0.00 0.00 8,653,806.41
R1200 Other expenses 0.00
R1300 Total expenses 474,879,178.38
Line of Business for: non-life insurance and reinsurance obligations (direct business and accepted proportional reinsurance)
Line of business for: accepted non-proportional reinsurance
Total
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES 52
S.05.02.01
Premiums, claims and expenses by country
C0010 C0020 C0030 C0040 C0050 C0060 C0070
Non-life
R0010
C0080 C0090 C0100 C0110 C0120 C0130 C0140
Premiums written
R0110 Gross - Direct Business 829,059,088.31 829,059,088.31
R0120 Gross - Proportional reinsurance accepted 0.00
R0130 Gross - Non-proportional reinsurance accepted 0.00
R0140 Reinsurers' share 0.00
R0200 Net 829,059,088.31 829,059,088.31
Premiums earned
R0210 Gross - Direct Business 853,562,036.17 853,562,036.17
R0220 Gross - Proportional reinsurance accepted 0.00
R0230 Gross - Non-proportional reinsurance accepted 0.00
R0240 Reinsurers' share 0.00
R0300 Net 853,562,036.17 853,562,036.17
Claims incurred
R0310 Gross - Direct Business 357,189,806.30 357,189,806.30
R0320 Gross - Proportional reinsurance accepted 0.00
R0330 Gross - Non-proportional reinsurance accepted 0.00
R0340 Reinsurers' share 0.00
R0400 Net 357,189,806.30 357,189,806.30
Changes in other technical provisions
R0410 Gross - Direct Business 0.00
R0420 Gross - Proportional reinsurance accepted 0.00
R0430 Gross - Non-proportional reinsurance accepted 0.00
R0440 Reinsurers' share 0.00
R0500 Net 0.00 0.00
R0550 Expenses incurred 474,879,178.38 474,879,178.38
R1200 Other expenses 0.00
R1300 Total expenses 474,879,178.38
Home Country
Top 5 countries (by amount of gross premiums written) - non-life obligations
Total Top 5 and
home country
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES 53
S.17.01.01
Non-Life Technical Provisions
Medical
expense
insurance
Income
protection
insurance
Workers'
compensation
insurance
Motor
vehicle
liability
insurance
Other motor
insurance
Marine,
aviation and
transport
insurance
Fire and other
damage to
property
insurance
General
liability
insurance
Credit and
suretyship
insurance
Legal
expenses
insurance
Assistance
C0020 C0030 C0040 C0050 C0060 C0070 C0080 C0090 C0100 C0110 C0120 C0180
R0010 Technical provisions calculated as a whole 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R0020 Direct business 0.00
R0050 0.00
Technical provisions calculated as a sum of BE and RM
Best estimate
Premium provisions
R0060 Gross - Total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -2,763,288.42 -2,763,288.42
R0070 Gross - direct business -2,763,288.42 -2,763,288.42
R0100
Total recoverable from reinsurance/SPV and Finite Re before the adjustment for expected losses due to counterparty default
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R0110 Recoverables from reinsurance (except SPV and Finite Reinsurance) before adjustment for expected losses 0.00
R0120 Recoverables from SPV before adjustment for expected losses 0.00
R0130 Recoverables from Finite Reinsurance before adjustment for expected losses 0.00
R0140
Total recoverable from reinsurance/SPV and Finite Re after the adjustment for expected losses due to counterparty default
0.00
R0150 Net Best Estimate of Premium Provisions 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -2,763,288.42 -2,763,288.42
Claims provisions
R0160 Gross - Total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 8,341,067.91 8,341,067.91
R0170 Gross - direct business 8,341,067.91 8,341,067.91
R0200
Total recoverable from reinsurance/SPV and Finite Re before the adjustment for expected losses due to counterparty default
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R0210 Recoverables from reinsurance (except SPV and Finite Reinsurance) before adjustment for expected losses 0.00
R0220 Recoverables from SPV before adjustment for expected losses 0.00
R0230 Recoverables from Finite Reinsurance before adjustment for expected losses 0.00
R0240
Total recoverable from reinsurance/SPV and Finite Re after the adjustment for expected losses due to counterparty default
0.00
R0250 Net Best Estimate of Claims Provisions 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 8,341,067.91 8,341,067.91
R0260 Total best estimate - gross 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5,577,779.49 5,577,779.49
R0270 Total best estimate - net 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5,577,779.49 5,577,779.49
R0280 Risk margin 4,435,000.00 4,435,000.00
Amount of the transitional on Technical Provisions
R0290 TP as a whole 0.00
R0300 Best estimate 0.00
R0310 Risk margin 0.00
R0320 Technical provisions - total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10,012,779.49 10,012,779.49
R0330 Recoverable from reinsurance contract/SPV and Finite Re after the adjustment for expected losses due to counterparty default - total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R0340 Technical provisions minus recoverables from reinsurance/SPV and Finite Re- total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10,012,779.49 10,012,779.49
Direct business and accepted proportional reinsurance
Total
Non-Life
obligation
Total Recoverables from reinsurance/SPV and Finite Re after the adjustment for expected losses due to
counterparty default associated to TP calculated as a whole
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES 54
S.19.01.21
Non-Life insurance claims
Z0020 Accident year / underwriting year
Gross Claims Paid (non-cumulative)
(absolute amount)
C0010 C0020 C0030 C0040 C0050 C0060 C0070 C0080 C0090 C0100 C0110 C0170 C0180
Year
0 1 2 3 4 5 6 7 8 9 10 & +
R0100 Prior 0.00 0.00 0.00
R0160 N-9 561,863,074.17 6,776,596.67 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 568,639,670.84
R0170 N-8 523,183,561.42 7,714,819.97 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 530,898,381.39
R0180 N-7 505,999,703.93 4,495,021.95 0.00 0.00 0.00 0.00 0.00 0.00 0.00 510,494,725.88
R0190 N-6 485,541,895.66 5,810,912.30 0.00 0.00 0.00 0.00 0.00 0.00 491,352,807.96
R0200 N-5 472,645,253.67 7,423,250.05 0.00 0.00 0.00 0.00 0.00 480,068,503.72
R0210 N-4 508,033,362.51 5,566,059.36 0.00 0.00 0.00 0.00 513,599,421.87
R0220 N-3 452,370,029.74 5,447,215.34 0.00 0.00 0.00 457,817,245.08
R0230 N-2 344,662,560.17 6,379,680.33 0.00 0.00 351,042,240.50
R0240 N-1 355,113,749.12 2,746,742.17 2,746,742.17 357,860,491.29
R0250 N 393,479,879.51 393,479,879.51 393,479,879.51
R0260 Total 396,226,621.68 4,655,253,368.04
Gross undiscounted Best Estimate Claims Provisions
(absolute amount)
C0360
C0200 C0210 C0220 C0230 C0240 C0250 C0260 C0270 C0280 C0290 C0300
Year
0 1 2 3 4 5 6 7 8 9 10 & +
Prior 0.00 0.00
N-9 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
N-8 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
N-7 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
N-6 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
N-5 0.00 0.00 0.00 0.00 0.00 0.00 0.00
N-4 0.00 0.00 0.00 0.00 0.00 0.00
N-3 0.00 0.00 0.00 0.00 0.00
N-2 0.00 0.00 0.00 0.00
N-1 0.00 0.00 0.00
N 8,341,016.62 0.00
Total 0.00
Total Non-life business
Accident Year
Development year
In Current year
Sum of years
(cumulative)
Year end
(discounted
data)
Development year
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES 55
S.23.01.01
Own Funds
Basic own funds before deduction for participations in other financial sector as foreseen in article 68 of Delegated Regulation 2015/35 Total
Tier 1
unrestricted
Tier 1
restricted
Tier 2 Tier 3
C0010 C0020 C0030 C0040 C0050
R0010
Ordinary share capital (gross of own shares) 5,000,100.00 5,000,100.00 0.00
R0030
Share premium account related to ordinary share capital 0.00 0.00 0.00
R0040
Initial funds, members' contributions or the equivalent basic own-fund item for mutual and mutual-type undertakings 0.00 0.00 0.00
R0050
Subordinated mutual member accounts 0.00 0.00 0.00 0.00
R0070
Surplus funds 0.00 0.00
R0090
Preference shares 0.00 0.00 0.00 0.00
R0110
Share premium account related to preference shares 0.00 0.00 0.00 0.00
R0130
Reconciliation reserve 102,795,915.82 102,795,915.82
R0140
Subordinated liabilities 0.00 0.00 0.00 0.00
R0160
An amount equal to the value of net deferred tax assets 0.00 0.00
R0180
Other own fund items approved by the supervisory authority as basic own funds not specified above 0.00 0.00 0.00 0.00 0.00
Own funds from the financial statements that should not be represented by the reconciliation reserve and do not meet the criteria to be classified as Solvency II own funds
R0220
Own funds from the financial statements that should not be represented by the reconciliation reserve and do not meet the criteria to be classified as Solvency II own funds 0.00
Deductions
R0230
Deductions for participations in financial and credit institutions 0.00
R0290
Total basic own funds after deductions 107,796,015.82 107,796,015.82 0.00 0.00 0.00
Ancillary own funds
R0300
Unpaid and uncalled ordinary share capital callable on demand 0.00
R0310
Unpaid and uncalled initial funds, members' contributions or the equivalent basic own fund item for mutual and mutual - type undertakings, callable on demand 0.00
R0320
Unpaid and uncalled preference shares callable on demand 0.00
R0330
A legally binding commitment to subscribe and pay for subordinated liabilities on demand 0.00
R0340
Letters of credit and guarantees under Article 96(2) of the Directive 2009/138/EC 0.00
R0350
Letters of credit and guarantees other than under Article 96(2) of the Directive 2009/138/EC 0.00
R0360
Supplementary members calls under first subparagraph of Article 96(3) of the Directive 2009/138/EC 0.00
R0370
Supplementary members calls - other than under first subparagraph of Article 96(3) of the Directive 2009/138/EC 0.00
R0390
Other ancillary own funds 0.00
R0400
Total ancillary own funds 0.00 0.00 0.00
Available and eligible own funds
R0500
Total available own funds to meet the SCR 107,796,015.82 107,796,015.82 0.00 0.00 0.00
R0510
Total available own funds to meet the MCR 107,796,015.82 107,796,015.82 0.00 0.00
R0540
Total eligible own funds to meet the SCR 107,796,015.82 107,796,015.82 0.00 0.00 0.00
R0550
Total eligible own funds to meet the MCR 107,796,015.82 107,796,015.82 0.00 0.00
R0580
SCR 70,967,104.83
R0600
MCR 31,935,197.17
R0620
Ratio of Eligible own funds to SCR 151.90%
R0640
Ratio of Eligible own funds to MCR 337.55%
Reconciliation reserve C0060
R0700
Excess of assets over liabilities 107,796,015.82
R0710
Own shares (held directly and indirectly) 0.00
R0720
Foreseeable dividends, distributions and charges
R0730
Other basic own fund items 5,000,100.00
R0740
Adjustment for restricted own fund items in respect of matching adjustment portfolios and ring fenced funds 0.00
R0760
Reconciliation reserve 102,795,915.82
Expected profits
R0770
Expected profits included in future premiums (EPIFP) - Life business
R0780
Expected profits included in future premiums (EPIFP) - Non- life business 11,122,020.51
R0790
Total Expected profits included in future premiums (EPIFP) 11,122,020.51
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES 56
S.25.02.01
Solvency Capital Requirement - for undertakings using the standard formula and partial internal model
Unique number
of component
Component description
Calculation of the
Solvency Capital
Requirement
Allocation from
adjustments due to
RFF and Matching
adjustments
portfolios
Consideration of the future management actions regarding
technical provisions and/or deferred taxes
Amount modelled USP Simplifications
Row C0010 C0020 C0030 C0050 C0060 C0070 C0090 C0120
1 50100I Premium risk 5,923,220.70 5,923,220.70 No embedded consideration of future management actions
5,923,220.70 9
2 50300I non-life catastrophe risk 28,487,290.12 28,487,290.12 No embedded consideration of future management actions
28,487,290.12 9
3 50500I Other non-life uw risk 1,813,204.36 1,813,204.36 No embedded consideration of future management actions
1,813,204.36 9
4 55900I non-life uw diversification -10,001,856.79 -10,001,856.79 No embedded consideration of future management actions
-10,001,856.79 9
5 10200I Interest rate risk 408,286.38 408,286.38 No embedded consideration of future management actions
408,286.38 9
6 10700I Spread risk 211,104.58 211,104.58 No embedded consideration of future management actions
211,104.58 9
7 10800I Concentration risk 1,366,391.51 1,366,391.51 No embedded consideration of future management actions
1,366,391.51 9
8 19900I Market risk - Diversification -544,155.38 -544,155.38 No embedded consideration of future management actions
-544,155.38 9
9 20100I Counterparty default risk 4,920,440.53 4,920,440.53 No embedded consideration of future management actions
4,920,440.53 9
10 70100I Operational risk 41,550,344.87 41,550,344.87 No embedded consideration of future management actions
41,550,344.87 9
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES 57
S.25.02.01
Solvency Capital Requirement - for undertakings using the standard formula and partial internal model
Calculation of Solvency Capital Requirement C0100
R0110 Total undiversified components 84,680,283.05
R0060 Diversification -13,713,178.22
R0120 Adjustment due to RFF/MAP nSCR aggregation
R0160 Capital requirement for business operated in accordance with Art. 4 of Directive 2003/41/EC
R0200 Solvency capital requirement excluding capital add-on 70,967,104.83
R0210 Capital add-ons already set
R0220 Solvency capital requirement 70,967,104.83
Other information on SCR
R0300 Amount/estimate of the overall loss-absorbing capacity of technical provisions
R0310 Amount/estimate of the overall loss-absorbing capacity of deferred taxes
R0400 Capital requirement for duration-based equity risk sub-module
R0410 Total amount of Notional Solvency Capital Requirements for remaining part
R0420 Total amount of Notional Solvency Capital Requirement for ring fenced funds
R0430 Total amount of Notional Solvency Capital Requirement for matching adjustment portfolios
R0440 Diversification effects due to RFF nSCR aggregation for article 304
R0450 Method used to calculate the adjustment due to RFF/MAP nSCR aggregation
No adjustment
R0460 Net future discretionary benefits
Approach to tax rate C0109
R0590 Approach based on average tax rate
Calculation of loss absorbing capacity of deferred taxes
Before the shock
C0110
R0600 DTA
R0610 DTA carry forward
R0620 DTA due to deductible temporary differences
R0630 DTL
After the shock
C0120
R0600 DTA
R0610 DTA carry forward
R0620 DTA due to deductible temporary differences
R0630 DTL
LAC DT
C0130
R0640 Amount/estimate of LAC DT
R0650 Amount/estimate of LAC DT justified by reversion of deferred tax liabilities
R0660
Amount/estimate of LAC DT justified by reference to probable future taxable economic profit
R0670 Amount/estimate of AC DT justified by carry back, current year
R0680 Amount/estimate of LAC DT justified by carry back, future years
R0690 Amount/estimate of Maximum LAC DT
British Gas Insurance Limited
Solvency and Financial Condition Report 2022
BGIL SFCR 2022 APPENDIX: PUBLIC QUANTITATIVE REPORTING TEMPLATES 58
S.28.01.01
Minimum Capital Requirement - Only life or only non-life insurance or reinsurance activity
Linear formula component for non-life insurance and reinsurance obligations C0010
R0010
MCR
NL
Result 73,694,085.34
Net (of
reinsurance/SPV)
best estimate and
TP calculated as a
whole
Net (of reinsurance)
written premiums
in the last 12
months
C0020 C0030
R0020 Medical expense insurance and proportional reinsurance 0.00
R0030 Income protection insurance and proportional reinsurance 0.00
R0040 Workers' compensation insurance and proportional reinsurance 0.00
R0050 Motor vehicle liability insurance and proportional reinsurance 0.00
R0060 Other motor insurance and proportional reinsurance 0.00
R0070 Marine, aviation and transport insurance and proportional reinsurance 0.00
R0080 Fire and other damage to property insurance and proportional reinsurance 0.00
R0090 General liability insurance and proportional reinsurance 0.00
R0100 Credit and suretyship insurance and proportional reinsurance 0.00
R0110 Legal expenses insurance and proportional reinsurance 0.00
R0120 Assistance and proportional reinsurance 5,577,779.49 854,783,745.38
R0130 Miscellaneous financial loss insurance and proportional reinsurance 0.00
R0140 Non-proportional health reinsurance 0.00
R0150 Non-proportional casualty reinsurance 0.00
R0160 Non-proportional marine, aviation and transport reinsurance 0.00
R0170 Non-proportional property reinsurance 0.00
Linear formula component for life insurance and reinsurance obligations C0040
R0200 MCR
L
Result 0.00
Net (of
reinsurance/SPV)
best estimate and
TP calculated as a
whole
Net (of
reinsurance/SPV)
total capital at risk
C0050 C0060
R0210 Obligations with profit participation - guaranteed benefits
R0220 Obligations with profit participation - future discretionary benefits
R0230 Index-linked and unit-linked insurance obligations
R0240 Other life (re)insurance and health (re)insurance obligations
R0250 Total capital at risk for all life (re)insurance obligations
Overall MCR calculation C0070
R0300 Linear MCR 73,694,085.34
R0310 SCR 70,967,104.83
R0320 MCR cap 31,935,197.17
R0330 MCR floor 17,741,776.21
R0340 Combined MCR 31,935,197.17
R0350 Absolute floor of the MCR 2,325,105.00
R0400 Minimum Capital Requirement 31,935,197.17
