Hi there I think I'm getting confused here... Does peak 1 relate to all assets (that fit in with the admissibility rules) and all liabilities for all business (NP, WP, UL)? But valued on a statutory basis. And peak 2 relates only to WP liabilities valued on a realistic basis? What confuses me is that all the admissible assets from peak 1 are taken into account here plus more,so it seems that assets of the whole business is being compared against liabilities of only WP business... Some clarification would be appreciated! Also, if under twin peaks, we hold the more onerous of peak 1 and peak 2 liabs, can this be a fair comparison if only WP is valued under peak 2? Thanks.
Twin Peaks First, Peak 1 is calculated for the whole company. That's all that's done if the company is a regulatory-basis-only life firm. But realistic reporters go on to Peak 2. The aim here is to see if a WPICC is needed for any of the WP funds. So, for each WP fund, a Peak 2 is calculated. This will include any NP business in the WP fund and so is not necessarily just for WP business. This result is then comapred, not with the Peak 1 result from above, but with a new Peak 1 calculation for just the WP fund we're looking at. This allows us to see if a WPICC is needed for this WP fund. This comparison is repeated for any other WP funds the company may have and all the WPICCs are then added up. Finally, this total WPICC is allowed for in the overall Peak 1 calculation (the one from the start) to get the overall Free Assets for the company.
So if peak 2 is biting, a WPICC must be held on top of the current peak 1 capital requirements? And if the amended peak 1 requirements is greater for the WP fund than that under peak 2,only the current capital requirements under peak 1 ie excluding any WPICC is needed?
