Management actionsManagement actions

Management actions

18. When determining the impact of each individual stress margin, and when determining the stressed policy liabilities, a life company must make allowance for the actions that it would expect to take in response to each type of stress, subject to the restrictions described below.
19. These actions may include, but are not limited to:
(a) reducing termination values;
(b) reducing discretionary additions to benefits;
(c) increasing premium rates;
(d) increasing the fees deducted from policies; and
(e) reducing the fees payable by a friendly society benefit fund to its management fund.
20. The allowances for management actions must be appropriate, justifiable and equitable in each of the scenarios. Any representations made in the relevant product disclosure documents must be taken into account in determining the management actions that would be applied. Management actions must satisfy policy owners’ reasonable expectations.
21. Termination values cannot be assumed to be reduced below minimum termination values.
22. Premium rate and fee increases cannot be assumed to occur within 12 months of the reporting date.[\[3\]](#_ftn3) The 12 month period must be extended to allow for the time it would take for the life company to increase premium rates or fees in response to stresses occurring over the 12 month period. Any contractual guarantees that may restrict the timing and amount of premium rate or fee increases must be recognised.
23. Premium rate or fee increases cannot be assumed as a response to the random mortality stress, the random morbidity stress or the event stress.
24. The present value of any assumed premium or fee increases (determined using stressed assumptions) cannot exceed the increase in the present value of claims and expenses incurred after the date at which the premium or fees increases are assumed to become effective. This test must be applied to each group of policies that would be affected by the assumed premium or fee increases.
25. The management actions for friendly societies must be in accordance with the existing rules of the benefit fund and not the broader range of management actions that may be accessed through a process of amending those rules.