Insurance (Valuation and Capital) Regulations 2004

Recognition and valuation of liabilities of life business (gross of reinsurance)

20A.—(1) A licensed insurer carrying on life business (called in this regulation a licensed insurer) must recognise, as a liability of a participating fund, non-participating fund or investment-linked fund, the liability (gross of reinsurance) in respect of the policies of the fund.

(2) Subject to paragraph (5), a licensed insurer must calculate the liability (gross of reinsurance) in respect of a participating policy as the value derived from the formula (A + B + C) − D, where —

(a)

A is the value of the expected future payments arising from the guaranteed benefits of the policy (including any expense that the insurer expects to incur in administering the policy and settling any claim against the policy);

(b)

B is the value of the expected future payments arising from the non-guaranteed benefits of the policy in respect of —

(i)	future allocations by way of bonus under section 17(6)(b) of the Act; and
(ii)	future allocations to the surplus account under section 17(6)(c) of the Act;

(c)

C is any provision made for any adverse deviation from the expected experience; and

(d)

D is the value of the expected future receipts arising from the guaranteed benefits of the policy.

(3) Subject to paragraph (5), a licensed insurer must calculate the liability (gross of reinsurance) in respect of a non-participating policy as the value derived from the formula (A + B) − C, where —

(a)	A is the value of expected future payments arising from the policy (including any expense that the insurer expects to incur in administering the policy and settling any claim against the policy);
(b)	B is any provision made for any adverse deviation from the expected experience; and
(c)	C is the value of the expected future receipts arising from the policy.

(4) Subject to paragraph (5), a licensed insurer must calculate the liability (gross of reinsurance) in respect of an investment-linked policy as the sum of —

(a)

the unit reserves, which is the value of the underlying assets backing the units relating to the policy; and

(b)

the non-unit reserves, which is the value derived by the formula (A + B) − C, where —

(i)	A is the value of the expected future payments arising from the policy (including any expense expected to be incurred in administering the policy and settling any claim against the policy), other than payments relating to the unit reserves;
(ii)	B is any provision made for any adverse deviation from the expected experience; and
(iii)	C is the value of the expected future receipts arising from the policy, other than receipts relating to the unit reserves.

(5) Subject to paragraph (6), a licensed insurer must not value the liability (gross of reinsurance) in respect of any policy mentioned in paragraph (2), (3) or (4) to be less than zero unless there are moneys due to the insurer when the policy is terminated on the valuation date.

(6) Where there are moneys due to a licensed insurer when a policy is terminated on valuation, the licensed insurer may value the liability (gross of reinsurance) in respect of the policy as negative to the extent of the amount due to the insurer.

(7) A licensed insurer must calculate the liability (gross of reinsurance) in respect of the policies of a participating fund as the sum of the following:

(a)	the liability (net of reinsurance) in respect of those policies determined in the manner provided in regulation 20(6);
(b)	the reinsurers’ share of policy liabilities in respect of those policies determined in the manner provided in regulation 16A(8).

(8) A licensed insurer must calculate the liability (gross of reinsurance) in respect of the policies of a non-participating fund or an investment-linked fund as the sum of the liability (gross of reinsurance) in respect of each policy of that fund determined in the manner provided in paragraph (3) or (4), respectively.

(9) Despite anything in this regulation, a licensed insurer may use the method mentioned in paragraph (12) (called in this regulation the simplified method) to determine the value of the liabilities (gross of reinsurance) in respect of the short-term policies issued as part of the insurer’s life business, if —

(a)	the insurer has verified (in accordance with paragraph (10)) that using the simplified method results in a value that is not less than the value determined in the manner provided in paragraphs (1) to (8) (as applicable); and
(b)	the insurer has determined that using the simplified method is appropriate, taking into consideration the risks covered by each policy and any other factors that may be relevant.

[S 137/2020 wef 31/03/2020]

(10) The verification mentioned in paragraph (9) must be carried out once in the year in which the valuation under paragraphs (1) to (8) is to be carried out, and —

(a)	in a case where the licensed insurer uses the simplified method for the purpose of preparing the “Annual Returns” mentioned in MAS Notice 129 for that year — as part of the actuarial investigation under section 37 of the Act; or
(b)	in a case where the licensed insurer uses the simplified method for the purpose of preparing the “Quarterly Returns” mentioned in MAS Notice 129 for that year — before the first time in that year it uses that method.

[S 137/2020 wef 31/03/2020]

(11) The Authority may require the licensed insurer to provide documentary evidence in support of the insurer’s verification under paragraph (9).

[S 137/2020 wef 31/03/2020]

(12) In this regulation, the simplified method to determine the value of the liabilities (gross of reinsurance) in respect of the short-term policies mentioned in paragraph (9) is the totalling of the following:

(a)

the premium liabilities (gross of reinsurance) of the policies, being an amount that is not less than the higher of the following:

(i)

the unearned premiums reserves (gross of reinsurance) of the policies, being an amount that is the aggregate of the unearned premium reserves (gross of reinsurance) for each policy determined in the manner provided in paragraph (14);

(ii)

the unexpired risk reserves (gross of reinsurance) of the policies, being an amount that is the aggregate of the expected future payments arising from future events insured under each policy in force as at the valuation date (including any expense expected to be incurred in administering the policy and settling claims against the policy) and any provision for any adverse deviation from the expected experience, calculated based on 75 per cent level of sufficiency;

(b)

the claim liabilities (gross of reinsurance) of the policies, being an amount that is not less than the value derived from the formula A + B, where —

(i)	A is the aggregate of the expected future payments in relation to claims under each policy incurred before the valuation date (including any expense expected to be incurred in settling the claims) and that fall due for payment after the valuation date, whether or not the claims have been reported to the insurer; and
(ii)	B is any provision for any adverse deviation from the expected experience, calculated based on 75 per cent level of sufficiency.

[S 137/2020 wef 31/03/2020]

(13) In determining the unexpired risk reserves (gross of reinsurance) of the policies mentioned in paragraph (12)(a)(ii) and claim liabilities (gross of reinsurance) of the policies mentioned in paragraph (12)(b), a licensed insurer must take into account any non-reinsurance recovery such as salvage and subrogation.

[S 137/2020 wef 31/03/2020]

(14) For the purposes of paragraph (12)(a)(i), the amount of unearned premium reserves (gross of reinsurance) for a short-term policy must be —

(a)

in the case of an insurer that carries on the business of reinsurance of liabilities under insurance policies —

(i)	an amount not less than 40% of the gross premiums written in the accounting period for the policy; or
(ii)	an amount calculated on a basis not less accurate than the 1/24th method; or

(b)

in any other case — subject to paragraph (15), an amount calculated on a basis not less accurate than the 1/24th method.

[S 137/2020 wef 31/03/2020]

(15) Where the simplified method is used, the amount of unearned premium reserves (gross of reinsurance) for a short-term policy must be calculated —

(a)	where the 1/24th method or some other more accurate method is used — using an amount of gross premiums written for the policy that is reduced by the actual commissions payable for the policy; or
(b)	in any other case — using an amount of gross premiums written for the policy without any deduction for commissions payable from the gross premiums for the policy.

[S 137/2020 wef 31/03/2020]

[S 845/2018 wef 01/01/2019]

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