• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Solvency Reporting Pillar 1

?

?????

Member
Hi all

Can anyone explain to me what the reasoning is behind regulatory basis only firms having to use a net premium valuation for non-unitised with-profits business, whereas realistic basis firms can use a gross premium method?
 
My understanding with all the additional restrictions on RBOLFs under Pillar 1 Peak 1 is that it is because they don't have to report under Pillar 1 Peak 2. So an RBOLF reports under a strict 1:1 regime only, whereas an RBLF reports under a more relaxed 1:1 but also has to report under 1:2.
 
So what is the point in relaxing 1:1 regime for RBLF ?
Why RBLF and RBOLF do not report under the same rules for 1:1 and RBLF have to follow 1:2 in addition ?

Is the point that you relax 1:1 regime because 1:2 regime is more stringent ? But it doeas little sens to me

In what way 1:2 is more stringent than 1:1 regime ?
 
Hi Z

But why would a Net Premium Valuation be more strict than a Gross Premium Valuation? (Assuming they both make allowances for reversionary bonuses.)

I recon relaxing the Peak 1 conditions for RBLF makes sense. If Peak 2 gives the higher liabilities (incl capital requirements), then the WPICC will even it out anyways.
 
????? said:
I recon relaxing the Peak 1 conditions for RBLF makes sense. If Peak 2 gives the higher liabilities (incl capital requirements), then the WPICC will even it out anyways.
Click to expand...

so you relax Peak 1 to be able to cut it through Peak 2 ???
I still do not see the point in doing that if you calculate the Peak 2 in the same way as in case of RBLF then the result should be the same, do I miss something?
 
????? said:
Hi Z

But why would a Net Premium Valuation be more strict than a Gross Premium Valuation? (Assuming they both make allowances for reversionary bonuses.)
Click to expand...

Beacuse in the gross premium valuation you make the allowance for initial expenses and hence the reserve is lower
R = PV benefits + PV Renewal Expences - PV Gross Premiums

The Gross premium includes the loading for initial expenses so you can deduct more

In case of net premium valuation the net premium is calculated to cover only benefits so
R= PV benefits - PV net premium

as a result under net premium valuation you can have positive reserve and under gross premim reserve you can have negative reserve

Half way between the two is the Zillmer adjustment and DAC

I hope I am right :)
 
:)

Ja, that sounds right. Apologies, stupid question - thought it was more complex than that.
 
You must log in or register to reply here.
Back
Top