Hi !
The solution for this question mentions "An alternative approach would be to declare a special bonus." - as a method of distributing surplus and then goes on to state -
"It will still be necessary to enhance asset shares as above…
… otherwise, the terminal bonus process would effectively remove the
addition."
the special reversionary bonus increases the guaranteed benefit under the policy. Why would you also enhance the asset share for the same? this would indirectly result in a higher terminal bonus - so takes credit for the same 'surplus' twice, in 2 different ways?
Are these not independent mechanisms altogether?
Thanks in advance
Last edited by a moderator: Sep 22, 2020