Q1, April 2014 SA2, part 7 I dont completely follow first paragraph. Could you please expand it more? Particularly a. Why to use specimen rather than actual policies b. I understand from core reading that to check the sustainability of bonus, one can compare the BEL with the assets backing the asset share. But why the paragraph mentions comparing asset share with asset backing the asset share?
The main issue here is that using actual whole life assurance asset shares can be inappropriate to use for setting bonuses because, at older ages, the asset shares could be very small or even negative, due to the large 'cost of life cover' deductions. You may have misread the paragraph: it is talking about compared the asset share with the reserves (ie the 'assets required for the expected payouts').
