My query is in regards to calculating the non-unit reserves
For simplicity lest ignore actuarial funding.
I understand that the insurance company would need to hold unit reserves and non-unit reserves for their unit-linked business.
Calculating the unit reserves is trivial which is the number of the units held multiplied by the bid price. A gross premium cashflow approach would be used to calculate the non-unit reserves.
In calculating the non-unit reserves would the cashflows, (the net cashflows) of the non-unit fund be projected on prudent assumptions as in calculating supervisory reserves for life conventional business?
Am I correct that the following assumptions would be made?
1) prudent mortality assumptions
2) prudent withdrawal assumptions
3) inflation rate (for expenses)
4) prudent growth rate of the non-unit fund
5) prudent renewal expenses
6) prudent growth rate of the unit fund - so that the cost of the death guarantee is prudent
Am I correct that the unit fund would need to be projected?
Many Thanks
Last edited by a moderator: Mar 22, 2008
