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Ch 15 - Capital Management - section 6.3 securitisation

V

Viki2010

Member
Can I please confirm my understanding of the following paragraph from the core reading?

"The introduction of SII, which does allow credit to be taken for expected future profits (albeit with some restrictions), has meant that such arrangements are no longer so effective, and other types of capital raising have become more attractive."

Is the credit for expected future profits under SII regime accounted for in assets?
Since there is no PVIF (unless special conditions exist) no release of profit margins from assumptions exist (since all are based on BEL).
So how is the credit being taken for expected future profits?
 
Viki2010 said:
Can I please confirm my understanding of the following paragraph from the core reading?

"The introduction of SII, which does allow credit to be taken for expected future profits (albeit with some restrictions), has meant that such arrangements are no longer so effective, and other types of capital raising have become more attractive."

Is the credit for expected future profits under SII regime accounted for in assets?
Since there is no PVIF (unless special conditions exist) no release of profit margins from assumptions exist (since all are based on BEL).
So how is the credit being taken for expected future profits?
Click to expand...
No the allowance for profits is not made through the assets.

The liabilities are calculated as best estimates, So, as you've said, there is no VIF. So we have no VIF to securitise. Effectively, we have reduced the reserves by any profit loading in the premium basis.

Best wishes

Mark
 
Mark Willder said:
No the allowance for profits is not made through the assets.

The liabilities are calculated as best estimates, So, as you've said, there is no VIF. So we have no VIF to securitise. Effectively, we have reduced the reserves by any profit loading in the premium basis.

Best wishes

Mark
Click to expand...

Can I please check how is the credit allowed under SII ? the Core reading states:

"The introduction of SII, which does allow credit to be taken for expected future profits (albeit with some restrictions),

is it just referring to profits beyond contract boundaries etc. discrepancies between inv. rate return and BEL's discount rate, shareholder transfers and release of RM after allowing for cost of holding it etc?
 
Viki2010 said:
Can I please check how is the credit allowed under SII ? the Core reading states:

"The introduction of SII, which does allow credit to be taken for expected future profits (albeit with some restrictions),

is it just referring to profits beyond contract boundaries etc. discrepancies between inv. rate return and BEL's discount rate, shareholder transfers and release of RM after allowing for cost of holding it etc?
Click to expand...
Yes, exactly right. :)
 
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