PIN 7.3.6 PIN 7.3.6
This report must provide details of, in respect of each Class of Business:(a) the product range;(b) any discretionary charges and benefits, options and guarantees, and reversionary bonus entitlements, where such features are included in a product;(c) reinsurance arrangements;(d) significant aspects of the recent experience of the Insurer, including, where relevant, a commentary on significant deviations of actual experience compared to the assumptions made in the previous valuation;(e) the Actuary's estimate of the value of Long-Term Insurance Liabilities, determined in accordance with Chapter 5;(f) the method and assumptions used by the Actuary in the valuation process, including, where relevant, a commentary on significant differences between the assumptions used and recent actual experience of the Insurer;(g) any expense reserves, mismatching reserves and any other special reserves included by the Actuary in the value of the Long-Term Insurance Liabilities, or recommended by the Actuary to be maintained, although not included in the valuation;(h) a determination of the value of surplus in the Long-Term Insurance Fund, before any distribution of such surplus;(i) a description of the Invested Assets used to determine the risk-adjusted yield on which the discount rate used in the valuation was based;(j) the adequacy and appropriateness of data made available to the Actuary by the Insurer;(k) procedures undertaken by the Actuary to assess the reliability of the data;(l) the model or models used by the Actuary;(m) the approach taken to estimate the variability of the estimate;(n) the sensitivity analyses undertaken;(o) any significant changes to the matters reported on during the period since the previous valuation, including, in the case of the matters referred to in (f), and otherwise, where relevant, an estimate of the effect of these changes on the Long-Term Insurance Liabilities as at the Reference Date; and(p) commentary on any other factors affecting the valuation.
Guidance1. The assumptions and comparisons referred to in 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 Business, it will be necessary for the determination of surplus at Rule 7.3.6(h) for the decision on allocation of bonuses to be dealt separately from the surplus for the purposes of determining the capital adequacy of the Fund. 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 (by convention, this is treated as occurring 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 Rule 5.6.7), on the grounds that it is not available to absorb losses of the Insurer. For that purpose, declaration of bonuses merely represents a transfer from one recognised liability to another.3. Factors that the Actuary should consider for the purposes of 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 Regulator may specify additional information to be presented in the Actuary's report. Guidance to Rule 3.6.1 indicates that, where the Regulator permits an Insurer to carry on Direct Long-Term Insurance Business with features of a kind described in Rule 3.6.1(1), it may, as a condition of that permission, require additional information to be provided in the Actuary's report. This additional information could include, for example, detail on market-consistent valuations of guarantees or options, and the results of scenario testing.