Contract boundaries UL

Discussion in 'SA2' started by Manmeet kaur, Feb 14, 2019 at 12:53 PM.

  1. Manmeet kaur

    Manmeet kaur Made first post

    I have a question on CB (contract boundaries) would be great if someone could help me on this topic.

    Considering UL regular premium with reviewable charges apply contact boundaries.

    1. What about UL products offering guaranteed benefits. Is CB not applied in this case ? If not then why...because the company can probably still close the new business for this product ?

    2. Continuing from 1..If product is close to NB and if company has to accept RP till the point guarantee term is applicable. Then probably CB not applying makes sense.

    Is this right ?

    3. RP UL products applying CB is more likely to have positive non unit bel than SP assuming other assumptions remain same ?

    Last edited: Feb 14, 2019 at 1:07 PM
  2. Em Francis

    Em Francis ActEd Tutor Staff Member

    Hi Manmeet
    In answer to your questions 1 and 2, UL products only have contract boundaries if the charges are completely reviewable so that they fully reflect the risks, ie the undertaking has the right to amend premiums or benefits such that the expected present value of the future premiums exceeds the expected present value of the future benefits and expenses payable under the portfolio. Going on this EIOPA definition, UL with guaranteed charges do not have contract boundaries.

    In answer to your question 3, are you able to provide a bit more background to this? Are you basing this on the fact that for SP UL non-unit reserve there will be no future unallocated regular premiums as a negative flow? If so, then you would expect the SP to have the positive non -unit reserve compared to the RP.

  3. Manmeet kaur

    Manmeet kaur Made first post

    Thanks Em, I think these answer my questions.

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