Instructions for specific itemsInstructions for specific items

Instructions for specific items

This form is designed to report items defined by LPS 2.04. Therefore the following instructions are largely intended to deal with matters not already defined or discussed in LPS 2.04 or to highlight particular aspects of the reporting requirements.

While these instructions apply to all life insurance companies, including friendly societies, not all items may be applicable to both: some items may not be applicable to friendly societies while others may not be applicable to life insurers.

1. Solvency Requirement

This part of the form consists of Items 1.1 to 1.11 inclusive. This section of the form aligns directly with the methodology of LPS 2.04 as set out in Section 6 of that Prudential Standard.

1.1. Greater of Solvency Liability and Minimum Termination Value (MTV)

Each of Items 1.1.1 to 1.1.3 inclusive are to be reported under three columns, relating to the amounts for each item –

1. Gross of outwards reinsurance (Column 1);
2. Reinsurance ceded under outwards reinsurance (Column 2); and
3. Net of outwards reinsurance (Column 3).

In paragraphs 6.2 and 6.3 of LPS 2.04, the actuary is relieved of calculating the total Solvency Liability (SL) and the total MTV (respectively) for a related product group (RPG) under certain conditions. For aggregating and reporting purposes, the single amount calculated for an RPG should be included in both the SL and the MTV, rather than not including any value for the inapplicable item.

Amounts under Columns 1 and 2 for Item 1.1.3 are reported amounts, not derived amounts, as effectively the maximum in each case is taken at the RPG level and then aggregated across the statutory fund. Therefore each of these amounts will not necessarily match the greater of the corresponding amounts entered under Items 1.1.1 and 1.1.2.

Note that amounts under Column 2 are expected to be entered with the opposite arithmetical sign to amounts under Column 1. Therefore Column 3 is derived for each item as the sum of Columns 1 and 2.

1.1.4. Amount of reinsurance/risk mitigation difference applicable to Item 1.1.3

While the above items (SL, MTV and ‘Greater of’ amount) are to be included in the calculation of Solvency Requirement on a Gross of reinsurance basis, paragraph 6.4 of LPS 2.04 allows an item of difference to be included as an offset or addition to each of these items. Report the effective amount of difference that is applicable to Item 1.1.3.

1.2. Expense Reserve

For friendly societies, report ‘zero’ under Items 1.2.1 and 1.2.2 as according to paragraph 9.1 of LPS 2.04, the expense reserve is Nil in the case of a friendly society.