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Member
The ASET solutions says:
"The choice of Peak 1 basis is subjective as the regulator imposes only a minimum level of prudence required. This creates a conflict of interest between policyholders and shareholders. The stronger the basis that is used, the higher the cost of bonus and hence the higher the shareholder transfer will be."
Why would the policyholder want a weaker basis used? Is it because there will be more free surplus and hence investment freedom, resulting in a potentially higher terminal bonus?
"The choice of Peak 1 basis is subjective as the regulator imposes only a minimum level of prudence required. This creates a conflict of interest between policyholders and shareholders. The stronger the basis that is used, the higher the cost of bonus and hence the higher the shareholder transfer will be."
Why would the policyholder want a weaker basis used? Is it because there will be more free surplus and hence investment freedom, resulting in a potentially higher terminal bonus?