Hi, The solution says "a net premium method must be used for valuing conventional with-profits business" The company in the question is a regulatory basis only company, is net premium reserve a MUST or only when it is higher than gross premium reserve? Can someone please clarify? Thank you.
My understanding is that for regulatory basis only firms the reserves held for with-profits must be at least as high as if a net premium method were used. If by using a gross premium valuation this (somehow) or any other methodology gave a higher value then I'd doubt the regulators would have a problem with it!
