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CA-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 with long-term insurance business. The mathematical reserves basis calculation for:

(a) Traditional long-term insurance business must be either 2% of mathematical reserves before deduction for reinsurance cessions or 4% of mathematical reserves after deduction for reinsurance cessions whichever produces the higher result;
(b) The mathematical reserves basis calculation for linked long-term insurance business where the company bears an investment risk must be as in Subparagraph CA-2.1.10 (a); and
(c) The mathematical reserves basis calculation for linked long-term insurance business where the company bears no investment risk must be either 0.5% of mathematical reserves before deduction for reinsurance cessions or 1% of mathematical 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 2007