The business of insurance concerns the taking of insurance premiums to underwrite risk and paying out claims to customers. Insurance companies invest premiums in stable income-producing assets, often long-term debt instruments, to generate income and ensure sufficient liquidity to pay claims as they fall due. The generation of interest income is therefore a key part of an insurance company's business. Most of an insurance company's investments are funded using premiums rather than debt, and taking into account the income from investments, HMRC expects insurance companies to be net tax-interest income recipients by a significant margin.

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