Long-term Insurance Business
CA-2.1.9
For
long-term insurance business thesolvency margin must be determined by taking the aggregate of the results arrived at by applying the calculations described in Paragraph CA-2.1.10 ('themathematical reserves basis calculation ') and Paragraph CA-2.1.11 ('thecapital sum at risk basis calculation '). Where the aggregate falls below theminimum fund , it must be substituted by the amount of theminimum fund .Amended: January 2007CA-2.1.10
The
mathematical reserves are defined as the provision made by an insurer to cover liabilities (excluding liabilities which have fallen due) arising under or in connection withlong-term insurance business . Themathematical reserves basis calculation for:(a)Traditional long-term insurance business must be either 2% ofmathematical reserves before deduction for reinsurance cessions or 4% ofmathematical reserves after deduction for reinsurance cessions whichever produces the higher result;(b) Themathematical reserves basis calculation forlinked long-term insurance business where the company bears an investment risk must be as in Subparagraph CA-2.1.10 (a); and(c) Themathematical reserves basis calculation forlinked long-term insurance business where the company bears no investment risk must be either 0.5% ofmathematical reserves before deduction for reinsurance cessions or 1% ofmathematical reserves after deduction for reinsurance cessions whichever produces the higher result.No negative value can be used as the
mathematical reserve under any policy.Amended: January 2007CA-2.1.11
The
capital sum at risk is defined as the benefit amounts payable as a consequence of the happening of the contingency covered by the policy contract less themathematical reserves in respect of the relevant contract. Thecapital sum at risk calculation is the greater of:(a) 0.15% of thecapital sum at risk before deduction for reinsurance cessions; or(b) 0.30% of thecapital sum at risk after deduction for reinsurance cessions.In either case no negative value can be used as the capital sum at risk under any policy.
Amended: January 2007
