Hi Mark,
(a) If we have this cashflow instead: -1, -1, 4, -1, 5, would the negative non-unit reserves be 1 and, if negative non-unit reserves were not allowed to be held by regulation, the reserves would be zero?
(b) Is this what "After taking account of the future non-unit reserves, there are no future negative cashflows for the policy ie there should be no future valuation strain." is referring to from the notes? What does the "After taking account of the future non-unit reserves" part mean?
(c) Also, this is under prudential valuation, right? If it was BE valuation, the reserves would be 2 for your example and negative non-unit reserves of 6 in my example?
I hope my understanding is correct for this.