The solution says "that the valuation rate of interest will be required which should have regard to the yields on corresponding existing assets, the level of default risk for corporate bonds and a level of reinvestment risk. How would the company allow for these risks in the assets and liabilities? Will the valuation interest rate be set lower to allow for these risks so that the company gets a higher reserve?
The solution says "churning will cause reputational risk". I know how mis-selling will cause reputation risk but how will churning cause reputational risk?
The solution says "The experience may differ due to model risk, parameter risk or random fluctuations risk". Please give an example of random fluctuations risk.
