CA-5.1.11

The amount of insurance liabilities which are long-term insurance business liabilities must be determined in accordance with International Accounting Standards applicable to insurance business or until such a standard or standards come into effect, with the provisions of Paragraphs CA-5.1.12 to CA-5.1.33 below.

CA-5.1.12

The determination of the amount of long-term liabilities (other than liabilities which have fallen due for payment before the valuation date) must be made on actuarial principles with due regard to the reasonable expectations of policyholders and must make proper provision for all liabilities on prudent assumptions with appropriate margins for adverse deviation of the relevant factors.

CA-5.1.13

The determination must take account of all prospective liabilities as determined by the policy conditions for each existing contract, taking due credit for premiums payable after the valuation date.

CA-5.1.14

The determination must take into account all guarantees including but not limited to:

CA-5.1.15

The determination must take into account all bonuses contractually added to each policy.

CA-5.1.16

The determination must take into account expenses including commission.

CA-5.1.17

Subject to Paragraphs CA-5.1.18, CA-5.1.19 and CA-5.1.20, the amount of the long-term liabilities must be determined separately for each contract by a prospective calculation.

CA-5.1.18

A retrospective calculation may be applied to determine the liabilities where a prospective method cannot be applied to a particular type of contract or benefit.

CA-5.1.19

Where necessary, additional amounts must be set aside on an aggregated basis for general risks that are not individualised.

CA-5.1.20

The method of calculation of the amount of liabilities and the assumptions used must not be subject to discontinuities from year to year arising from arbitrary changes and must be such as to recognise the distribution of profits in an appropriate way over the duration of each policy.

CA-5.1.21

The distribution of surplus as bonus to participating policies must consider the level of premiums under these contracts, the assets held in respect of these contracts and the custom and practice of the company in the manner and timing of the distribution of profits.

CA-5.1.22

The liability under a contract (other than a linked long-term contract) must be calculated using the net premium valuation method using rates of interest and rates of mortality or morbidity considered appropriate by the actuary appointed as per the requirements of Paragraph AA-4.1.1, at a prudent level.

CA-5.1.22A

The value of unit liabilities and non unit liabilities must be calculated separately for a unit linked policy. The value of unit liabilities is taken as the net asset value of the units at the valuation date. Non-unit liabilities must be valued by projecting future cash flows to ensure that all future outgoes can be met without recourse to additional capital support at any future time during the duration of the unit linked contracts at a prudent level.

CA-5.1.23

Other suitable alternative methods may be employed where it can be demonstrated that the alternative methods employed result in reserves no less, in aggregate, than would result from the net premium valuation method.

CA-5.1.24

In order to take account of the acquisition expenses, the net premium to be valued for the purpose of Paragraph CA-5.1.22 above may be increased by an amount not greater than the equivalent, taken over the whole period of premium payments and calculated according to the rates of interest and rate of mortality and morbidity employed in valuing the contract, of 3.5 percent of the relevant capital sum under the contract.

CA-5.1.25

The increased net premium as computed in Paragraph CA-5.1.24 must not exceed the premium actually payable by the policyholder under the contract.

CA-5.1.26

For the purposes of Paragraph CA-5.1.24 'relevant capital sum' means:

excluding in all cases any vested reversionary bonus and any capital sums for temporary assurances.

CA-5.1.27

The rate of interest employed for the valuation must be determined prudently with due regard to the yield on the existing assets attributable to the life business as well as the yields expected to be obtained on sums to be invested in the future.

CA-5.1.28

The amount of the liability in respect of any category of contracts must, where relevant, be determined on the basis of prudent rates of mortality and morbidity which in the opinion of the actuary are appropriate for that category.

CA-5.1.29

Provision of expenses whether implicit or explicit must not be less than the amount required, on prudent assumptions, to meet the total cost that would be incurred in fulfilling the existing contracts if the company were to cease to transact new business twelve months from the valuation date. This provision must consider the company's actual expenses in the last twelve months before the valuation date and the expected level of inflation on future expenses.

CA-5.1.30

Provision must be made on prudent assumptions to cover any increase in liabilities caused by policyholders exercising options under their contracts including options for guaranteed cash payments.

CA-5.1.31

The liability under a contract for life business must not be less than zero.

CA-5.1.32

No allowance must be made in the valuation for the voluntary discontinuance of any contract if the amount of liability so determined is less than the corresponding amount without the allowance for voluntary discontinuance.

CA-5.1.33

The determination of the amount of long-term liabilities must take into account the nature and term of the assets representing those liabilities and the value placed upon them and must include prudent provision against the effects of possible future changes in the value of the assets on:

CA-5.1.34

For a life policy or an extension to a life policy with a policy term of less than or equal to one year, the valuation of these liabilities must follow Paragraphs CA-5.1.3 to CA-5.1.10.