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The Effects of Solvency Margins on U.K. Life Companies

Published online by Cambridge University Press:  11 August 2014

W. P. May  and
K. J. Newbury
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Extract

The requirement for a United Kingdom life office to hold solvency margins in addition to its normal actuarial reserves took full effect on 15 March 1984. At the time of writing, solvency margins for U.K. life offices have therefore had an effective life of under two years.

Before the introduction of the regulations, many comments were made within the life insurance industry about the effects which the introduction of the life solvency margins would have on the financial position of U.K. life offices. This therefore seems an appropriate time to reflect on the theoretical financial consequences of solvency margins from the point of view of a U.K. life company, and comment on the practical effects which have been observed to date.

Type
Research Article
Information
Journal of the Staple Inn Actuarial Society , Volume 30 , December 1987 , pp. 67 - 96
Copyright
Copyright © Institute of Actuaries Students' Society 1987

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References

BIBLIOGRAPHY

(1) ‘The Solvency of Life Assurance Companies’, presented by the Solvency Margin Working Party of the Faculty of Actuaries to the Faculty on 8 October 1984.Google Scholar
(2) Insurance Companies Act 1982.Google Scholar
(3) The Insurance Companies Regulations 1981.Google Scholar
(4) The Insurance Companies (Accounts and Statements) Regulations 1983.Google Scholar
(5) The Insurance Companies (Amendment) Regulations 1985.Google Scholar
(6) Guidance note on applications for orders to count implicit items under Regulations 10 to 13 of the Insurance Companies Regulations 1981 in respect of long term business, published by the DTI in October 1984.Google Scholar
(7) ‘Solvency Margins’, a paper presented by P. H. Hinton to the Institute of Actuaries Convention at Birmingham on 12 September 1985.Google Scholar
(8) ‘Valuation Returns in relation to Solvency Margins’, memorandum to appointed actuaries from the Government Actuary, dated 13 November 1985.Google Scholar