Definions I Don't Want To Bullshit Flashcards
Asset share
The accumulation of the premiums less deductions associated with the contract, (plus, for with-profits policies, an allocation of profits on without-profit business if appropriate), all accumulated at the actual rate of return earned on investments
Unit fund
The policyholders basic benefits and the company has a liability to pay this amount at the time of claim
Non-unit fund
The accumulated value of
all the charges the company has taken out of its unit-linked policies,
less all the ACTUAL COSTS it has incurred on behalf of those contracts,
less any distribution of profit it has made to its providers of capital,
plus any capital injections paid in
Conventional addition to benefits approach
Bonuses added to each policy is defined in some proportion to benefits currently payable on a claim under that policy. The bonuses are calculated and then added to the contractual benefits payable under each contract
Terminal distribution
All profits we retain from underpaying bonuses throughout the policy term, we pay back a big lump sum as an extra distribution
Bonus earning capacity
The level of bonus that the company could reasonably afford to continue paying into the future according to the assessment of future experience
An accumulating with-profits contract
A with-profits policy to which bonuses are added annually in relation to the premiums payable to date plus previously declared bonuses. A terminal bonus may be added when the policy becomes a claim on maturity, death, or surrender
Revalorisation method
Bonuses are granted by increasing the supervisory reserves, benefits, and premiums of with-profits contracts by r%
The contribution method
Each policy receives a share of distributable surplus in PROPORTION to its contribution to surplus
Internal unit-linked fund
Consists of a clearly identifiable set of assets. The fund is divided into a number of equal units consisting of identical sub-sets of the fund’s assets and liabilities (check in glossary)
Basic equity principle
The interests of unit-holders not involved in a unit transaction should be unaffected by that transaction
Appropriation price
-the price at which a company will create a unit
-the amount of money the company has to put into the fund in respect of each unit it creates in order to preserve the interests of existing unit-holders
Expropriation price
-the price at which a company will cancel a unit
-the amount of money the company should take out the fund in respect of each unit it creates in order to preserve the interests of existing unit-holders
Broad equity approach
The basis is only changed if there is a significant cashflow movement against the existing basis
Actuarial Funding
A technique whereby life insurance companies can hold reserves for unit-linked contracts to which it can be applied, and thus can reduce new business strain
