15Initial Calculation of Policy Liability

SECTION 15 Initial Calculation of Policy Liability

Overview

When Policy Liabilities are first calculated in accordance with the latest version of this Standard, the calculation of Profit Margins and/or Acquisition Expense Recovery Components for in force business should have regard to the history of that business. Best Estimate Bonuses should be determined consistently.

Alternative approaches may be appropriate, and the choice of approach will be a matter for professional actuarial judgement. In making that judgement consideration should be given to :

 the available data; and

 the type of benefit; and

 the duration the business has been in force; and

 materiality.

15.1 In first applying the latest version of this Standard to in force Related Product Groups, the Actuary must seek to determine a reasonable estimate of the position, at the beginning of the reporting period, that would have existed had the latest version of this Standard been applied since Commencement.

15.2 Where the valuation of policy liabilities in respect of Life Insurance Contracts, and reporting of profit, has previously been undertaken on a basis consistent with the principles of a then current version of the Valuation Standard it may be appropriate that those previous calculations be acknowledged as satisfying the principles of this section, provided that:

1. the Value of Future Best Estimate Bonuses and Shareholder Profits that would be determined under this standard exceeds the Adequacy Threshold; and
2. the result is not considered to be materially different from that which would arise under a strict application of paragraph 15.1.