Hello, I'm wondering why for business on an 'I-E' basis it is fine to do the following when projecting the SII BEL cashflows: a) project investment return net of PH tax (incl. discount rate) b) net down expenses I mean, the BEL should make allowance only for the PH tax, right? While I-E is the total taxable profit, ie PH and SH combined. Thank you! Mateusz
Ok, having thought about this a bit more, could it be because: 1) netting down expenses has actually to do with a tax relief a company can achieve on its expenses if it is XSI, ie if I exceeds E? 2) using net of PH investment returns will produce benefits which are after PH income tax, as expected? Thanks, Mateusz
Hi Mateuz Yes, you are one the right lines but be careful this is not policyholder income tax, it is tax charged to policyholders but which reflects company's tax on policyholder profit which is charged to policyholders. Solvency II BEL needs to include tax charged to policyholders and that required to settle insurance obligations as well as the impact of expense relief. Therefore for BLAGAB (I-E), tax is suffered on future I less E and this needs to be reflected in the BEL or cash-flows will be overstated. Hope this helps. Thanks Em
