• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
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Guarantees

K

Kris26

Member
What does it mean for "Guarantees to become more or less onerous over time"?
 
In basic terms a guarantee is a promise that aims to protect against an undesirable outcome eg that investment returns are less than x%. It is a guarantee against a level of uncertainty. The variable that underlies the guarantee will change in terms of its magnitude and probability. Hence over time the guarantee is more or less likely to bite hence the degree to which it is onerous changes. It can also change because a companies attitude to risk has changed. If you think about a guaranteed return, if the returns are poor near the time a maturity guarantee applies say, the less time there is for investment returns to improve so the guarantee does not bite.
 
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