Hi I'm a bit confused about what constitutes as best estimate liabilities (BEL) for WP business. The definition of BEL is expected present value of future liability cash flows using best estimate assumptions i.e. not including prudence. For with-profits business, should the BEL at say valuation time t therefore include all future bonuses or only bonuses declared up to date, or 1 years future bonus? I'd have thought that future bonuses having not being declared yet wouldn't need to be included, but the BEL definition implies that future bonuses should be included. Could anyone help clear my confusion please? Thank you.
The answer will depend on what type of reserve we're looking at, but that is beyond Subject ST2. I'd say that our best estimate of what will happen is that bonuses will be declared in the future, so we should allow for future bonuses. However, if the question wants a best estimate of the value of the guarantees then I'd ignore future bonuses. Best wishes Mark
