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A Review of the Statutory Valuation of Long-Term Insurance Business in the United Kingdom

Published online by Cambridge University Press:  10 June 2011

P.W. Wright ,
S.J. Burgess ,
R.G. Chadburn ,
A.J.M. Chamberlain ,
R. Frankland ,
J.E. Gill ,
D.J. Lechmere  and
S.F. Margutti
P.W. Wright
Affiliation:
Prudential Corporation plc, 142 Holborn Bars, London EC1N 2NH, U.K. Tel: +44(0)171-548-3874; Fax: +44(0)171-548-3422
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Abstract

This paper considers the approaches currently used by life offices for statutory valuations, and proposes a number of changes to current practice. It builds on the earlier work of Philip Scott's Working Party and a working party which reported on all aspects of unitised with-profits business to the 1996 CILA conference.

Recommendations are made for each of the major categories of long-term business, in particular for the introduction of a bonus reserve standard for accumulating with-profits business, whilst retaining the net premium standard for conventional with-profits business. It is proposed that the current net premium approach for non-profit business should be replaced by a gross premium method. The paper also develops a greater codification of the calculation of non-unit reserves on linked business.

Considerable emphasis is placed on the requirement for statutory reserves to have regard to PRE. It is assumed throughout that the E.C. Third Life Directive remains in its current form.

A number of examples are provided which illustrate the proposed method for accumulating with-profits business. Appendices to the paper include a draft of suggested consequential changes to the Insurance Companies Regulations 1994, and a revised supporting version of the whole of GN8.

Keywords

Statutory ValuationsPolicyholders' Reasonable ExpectationsAccumulating With-ProfitsBonusesLinked BusinessInsurance Companies Regulations
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 4 , Issue 4 , 01 October 1998 , pp. 803 - 864
Copyright
Copyright © Institute and Faculty of Actuaries 1998

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References

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