Determination of liabilities of life policies on minimum basis
26.—(1) Where by these Regulations the liabilities of an insurer in respect of a life policy are required to be determined on the minimum basis, that shall be taken as requiring a determination in accordance with this regulation.
(2) The liability in respect of a policy shall be taken as equal to the amount (if any) by which the value as at the valuation date of the reversion in the policy moneys, according to the contingencies on which they are payable, exceeds the adjusted value as at the valuation date of the premiums (if any) payable after that date, according to the contingencies upon which they are respectively payable.
(3) For the purposes of paragraph (2), the adjusted value of the premiums payable after the valuation date is their actual value adjusted —
(a)
by assuming that the policy provides only for such premiums as are sufficient to provide for the risk incurred by the insurer in issuing it, without provision for bonuses, office expenses or other charges; and
(b)
where the premiums are payable for a whole life insurance, endowment insurance or deferred annuity (with or without other benefits) by making whichever of the further adjustments stated in paragraph (4) will produce the lower adjusted value.
(4) The further adjustments mentioned in paragraph (3)(b) are —
(a)
to assume that the policy is issued one year after the actual date of its issue (but without thereby postponing the time when the premiums cease or any policy moneys become payable if that time is fixed by reference to the date of issue) and to calculate the premiums referred to in paragraph (3)(a) accordingly; and
(b)
to make to the premiums referred to in paragraph (3)(a) such addition as would have at the date of issue of the policy a capitalised value equal to 3% of the policy moneys (taking any annuity at the capitalised value it would have on becoming payable).
(5) In respect of a policy other than an annuity, the valuation shall be made by using —
(a)
the 1992 Commissioner’s Valuation Table for male lives and the 1992 Commissioner’s Valuation Table with a three-year age setback for female lives; and
(b)
a rate of interest of 4% per annum.
(6) In respect of an annuity, the valuation shall be made by using —
(a)
the a(90) Ultimate Table rated down 2 years; and
(b)
a rate of interest of 5% per annum.
(7) Where the liabilities in respect of more than one policy are to be valued on the minimum basis, and it is necessary to have regard to the ages of persons on whose lives the policies were issued or to any periods of time connected with the policies, it shall not be necessary to take exact ages and periods so long as the result produced by not doing so is reasonably approximate to that which would be produced by doing so.
(8) The basis adopted for a statutory valuation shall be deemed to be not less stringent than the minimum basis if the rate of interest used is not greater than the rates specified in paragraph (5) or (6), as applicable, and the mortality table used (if not that specified in paragraph (5) or (6)) is approved by the Authority as being, with the rate of interest which is to be used, likely to result in the liabilities being given a value not less in the aggregate than if valued on the minimum basis.
(9) Notwithstanding paragraphs (5), (6) and (8), the Authority may allow any insurer to adopt such other basis of statutory valuation approved by the Authority in respect of such description of life policy as specified by the Authority; and for the purposes of these Regulations, such approved basis of valuation shall be deemed to be a valuation on the minimum basis.