Hi Can anyone explain to me the difference between the difference between a non-unit fund and a non-unit reserve? I thought the two were the same and the terms could be used interchangeably. Is it that the non-unit fund = all the charges only and the non-unit reserve = all charges less expenses and benefits? Any help would be really appreciated. Cheers
The two terms are not quite the same so you will need to be careful where you use them in the exam. The non-unit fund is built up from all the past non-unit related cashflows ie charges less expenses less cost of guarantees less transfers out of the fund to the shareholders. The non-unit reserve is the amount of money that the regulator requires to be set up to cover the possibility that future expenses and costs exceed future premiums. To be solvent, the non-unit fund needs to be bigger than the required non-unit reserve. The insurer may need to inject capital into the fund to ensure this. Best wishes Mark
