Unit-linked assurance: observations and propositions

Extract

Perhaps this paper should be entitled A Description of Methods Being Used in Connexion With a Contract of the Grant and Kingsnorth Category ‘A’ Type, For Want of Any Better Ideas. (The reference is to Unit Trusts and Equitylinked Endowment Assurances by A. T. Grant and G. A. Kingsnorth, J.I.A. 93, 387.) It has been written because the publication of the Scott Report and the passing of the Insurance Companies Act make it desirable that the Institute should discuss unit-linked assurance again at this time, and because certain aspects, in particular maturity guarantees and reserves for tax on capital gains, have not been dealt with adequately in the past. Propositions in respect of these are made in the paper, and it is hoped that, as a result of discussion, ‘generally accepted actuarial principles‘category B’ type contracts, for example considerations affecting pricing units net of tax on capital gains, but the paper does not attempt to deal with this type of contract more generally, as fundamentally different considerations are involved. It does deal with ‘category A’ policies linked to unitized internal funds as well as those linked to units of Authorized Unit Trusts.