PIN 5.6.7

In measuring the liability referred to in Rule 5.6.6, the Insurer must:

(a) use actuarial principles;
(b) make proper provision for all liabilities on prudent assumptions that include appropriate margins for adverse deviation of the relevant factors; and
(c) assign a liability value greater than or equal to zero to each contract or to each homogeneous group of contracts;
(d) not make allowance for any future lapse, surrender, making paid-up or revival of a contract where such an allowance would result in a decrease in the liability in respect of that contract;
(e) take specifically into account:
(i) all guaranteed Policy Benefits, including guaranteed surrender values;
(ii) vested, declared or allotted bonuses or other forms of participation to which policy holders are already either collectively or individually contractually entitled;
(iii) reasonable expectations of policyholders in respect of bonuses or other forms of participation, other than as set out in (ii);
(iv) all options available to the policy holder under the terms of the contract;
(v) discretionary charges and deductions from Policy Benefits, in so far as they do not exceed the reasonable expectations of policy holders;
(vi) expenses, including commissions; and
(vii) any rights under contracts of reinsurance in respect of Long-Term Insurance Business: and
(f) apply a discount rate determined with reference to the expected risk-adjusted yield on the assets allocated to cover the liability and investment of net receipts attributable to the policies. In arriving at the discount rate, prudent allowance must be made for the risk of adverse deviation in those expected yields.