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Jul 5 2007 onwards

PIN 7.3.6 Guidance



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1. The assumptions and comparisons referred to in PIN Rule 7.3.6(d) and (f) should cover all significant components of the valuation, including consideration of persistency, mortality, expense levels, and investment returns.
2. Where the business of the Insurer includes participating Long-Term Insurance BusinessG , it will be necessary for the determination at PIN Rule 7.3.6(h) to deal separately with surplus for the purposes of a decision on allocation of bonuses and surplus for the purposes of determining the capital adequacy of the FundG . For the former of these two purposes, the insurer is identifying the pool, commonly known as surplus, that is available for allocation as bonuses (or equivalent) on participating policies. The allocation then reduces the surplus (note — by convention, this is treated as happening as at the reporting date). By contrast, for the latter of the two purposes, that portion of the remaining surplus that is expected to be allocated eventually to policyholders is also treated as a liability (in PIN Rule 5.6.7), on the grounds that it is not available to absorb losses of the InsurerG . For that purpose, declaration of bonuses merely represents a transfer from one recognised liability to another.
3. Factors that the ActuaryG should consider for the purposes of PIN Rule 7.3.6(p) may include risks that may vary between the jurisdictions in which business is carried on, as well as generic risks. The former category might include the risk of political unrest, and the latter operational risks such as fraud.
4. The DFSAG may specify additional information to be presented in the Actuary'sG report. PIN 3.6.1 Guidance indicates that, where the DFSAG permits an InsurerG to carry on Direct Long-Term Insurance BusinessG with features of a kind described in PIN Rule 3.6.1(1), it may, as a condition of that permission, require additional information to be provided in the Actuary'sG report. That additional information could include, for example, detail on market-consistent valuations of guarantees or options, and the results of scenario testing.
[Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]