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Sept 2007 Qu 3(v) - Tax on ACCI

L

LucyLou

Member
Hi,

I am a bit confused by the Examiner's Report for this question and was hoping someone might be able to provide some insight.

The question is about how you allow for tax in pricing an term ACCI contract (think the product is based on Virgin Cancer Care - benefit payable on death and/or earlier diagnosis of cancer).

I thought ACCI contracts are taxed partly as Class I BLAGAB and partly as Class IV PHIB. So you would need to seperate profit testing cashflows into their component benefits and then allow for appropiate type of tax on relevent cashflows (for claims should be relatively straightforward. But for premium and expenses I guess that you would need to do something approximate maybe in same proportions as claims).

However, the examiners reports just treats it all as BLAGAB and doesn't make any mention of the Case IV PHIB component.

Is this an oversight or have I missed something?

(Don't actually have much experience of working with ACCI contracts so have based the above on my interpretation of what's in the notes and am very open to corrections!).
 
I asked a couple of people about this yesterday and got an answer.

Apparently the tax treatment of ACCI products has recently changed (used to always all be taxed as BLAGAB). So the examiner's report to this question is out of date.

Mystery solved!
 
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