Solution to the above question seems to suggest that the claims component in the PVFP is not at all impacted by the change of EV basis from passive to Market-consistent.
I am not entirely sure why this would be the case, as I thought the change would result in a change in claims assumptions from a "locked in" basis to more of a best estimate basis. That is, the value of claims expected will change.
Or am I to interpret the EV under the passive basis as the TEV (traditional Embedded Value) which already adopts best estimate assumptions.
Otherwise I am not convinced at all that the solution is correct. This would include the no change in release of capital as suggested by the solution.
Please, would you be able to shed some light
Thanks for your help,
Jian
Last edited by a moderator: Sep 16, 2018