Deposit backs and PVIF vs BEL

[studentactuary15]

I have two small questions:

1. How are deposit backs treated on the S2 balance sheet? I know for impact of deposit backs on EV are that both assets and liabilities would increase => hence no change. But is it similar for S2?
   
   
2. What is the difference between PVIF and BEL? PVIF by definition is, the present value of future shareholder cashflows from in-force covered business. BEL by definition is, the present value of expected future cashflows, discounted using a ‘risk-free’ yield curve. Is it just that the assumptions are best estimate and the RFR is used for the latter? And the former uses some RDR and assumptions can be either best estimate or prudent? The MCEV uses RFR so this makes it more similar to BEL.

Thank you in advance.

 

[Lindsay Smitherman]

1. How are deposit backs treated on the S2 balance sheet? I know for impact of deposit backs on EV are that both assets and liabilities would increase => hence no change. But is it similar for S2?

Yes: balance sheet neutral. A deposit back is effectively an amount of collateral that is placed with the insurer, but it is still effectively 'owned' by the reinsurer. See https://www.acted.co.uk/forums/index.php?threads/reinsurance-deposit-back.11516/

 

[Lindsay Smitherman]

2. What is the difference between PVIF and BEL? PVIF by definition is, the present value of future shareholder cashflows from in-force covered business. BEL by definition is, the present value of expected future cashflows, discounted using a ‘risk-free’ yield curve. Is it just that the assumptions are best estimate and the RFR is used for the latter? And the former uses some RDR and assumptions can be either best estimate or prudent? The MCEV uses RFR so this makes it more similar to BEL.
Thank you in advance.

PVIF = present value of future shareholder profits on in-force business
BEL = amount needed to meet future obligations to policyholders