W_Glossary 3 Flashcards
Actuarial Funding
This is a method that a life insurance company can use to reduce the size of the “unit reserves” it needs to hold in respect of its unit linked business. The company effectively capitalises some or all of the unit related charges it expects to receive from the units it has nominally allocated, with the funding then being repaid from these future charges as they are received.
When appropriate surrender penalties are incorporated, it enables the company to reduce its financing requirement.
Aggregate asset share
Asset share calculations can be carried out for the individual policies, for specified product lines or for the whole with profits portfolio. The latter two are sometimes referred to as aggregate asset share. This term may also be used to describe the sum of the individual asset shares.
Anti - selection
People will be more likely to take out contracts when they believe their risk is higher than the insurance company has allowed for in its premiums. This is known as anti-selection.
Anti-selection can also arise where existing policyholders have the opportunity to exercise a guarantee or an option. Those who have the most to gain for the guarantee or option will be the most likely to exercise it.
Appraisal value
The appraisal value of a proprietary life insurance company is the sum of the company and the value to its shareholders of the future profits they expect to receive from future new business. The latter part of the appraisal value is often referred to as the “goodwill” value of the company.
Appropriation price
This is the amount of money per unit put into a unit linked fund for each new unit appropriated, i.e. created, such that the net asset value per unit is the same after as before appropriation.
Therefore, it is the price at which a company will create a unit.
Assets
The assets of a life insurance company are what it holds in order to meet its liabilities and to provide working capital. It usually refers to the investments held by the company.
Asset Share
The asset share is the retrospective accumulation of past premiums, less expenses and the cost of cover, at the actual rate of return on the assets. The accumulation could be carried out for a single contract or a group of contracts. It is referred to as the earned asset share of the retrospective earned asset share.
In the case of with profits contracts, allowance may be made for miscellaneous profits from with profits contracts and from surrenders and lapses, and also for the cost of guarantees and any capital support provided.
Bancassurer
A bancassurer is an insurance company that is a subsidiary of a bank or building society and whose primary market is the customer base of that bank or building society.
Best estimate reserve
This reserve would be calculated using assumptions that are best estimates rather than assumptions that contain conservative margins.
Bid price
In the context of a unitised life insurance contract, this is the price the life insurance company uses to redeem the units it has allocate to the contract.
