A few suggestions to get more realistic projections Allow new business to the

A few suggestions to get more realistic projections

This preview shows page 60 - 62 out of 66 pages.

A few suggestions to get more realistic projections : - Allow new business to the average level of a set period, say, three to five years. - Given increased competitiveness and markets, it seems unreasonable to presume continued profitability of new business beyond, say, five years. Forward-looking dividend discount model scan be looked at for reference. Also, most business plans do not go beyond 5 years. - The development of the local market as a whole. - Perhaps the local regulator can say something about this. - A review of projections by the second line of defence (actuarial). - Maintaining a record of forecasting accuracy seems useful. It may be useful to clarify that new business is defined in a SII sense, also including renewals. Q18.6 The uncertainty of long time horizons in the projection of LAC DT is exactly the same as in any other calculation of all other positions in the solvency balance sheet, just like the technical provisions. Exactly those time horizons, however, are necessary to evaluate long term business with guarantees like annuities adequately. See Q. 18.5 Q18.7 A link between the recovery period in the ORSA and in the LAC DT could be envisaged to offset differences between jurisdictions. See Q. 18.2 (for returns on assets / liabilities) and Q. 18.5 (for new business). There should be made a distinction between the robustness of the projection source. The run-off cash flows of the existing business, which is also the basis for the best estimate liability gives good long term projections Q18.8 We believe this is a sensible approach and suggest a maximum of 5 years which seems to be a maximum length of business planning. The time horizon for the projection of future taxable profits should be the same as the time horizon used to calculate Template comments 60/66
Image of page 60

Subscribe to view the full document.

Comments Template on Discussion Paper on the review of specific items in the Solvency II Delegated Regulation Deadline 3 March 2017 23:59 CET all other positions of the solvency balance sheet, since deferred taxes also occur over the entire horizon. The uncertainty of long time horizons in the projection of LAC DT is exactly the same as in any other calculation of all other positions in the solvency balance sheet, just like the technical provisions. Exactly those time horizons, however, are necessary to evaluate long term business with guarantees like annuities adequately. A limitation is a last step to consider. If a limit is to be used, the new business assumptions for life is more logical than assets returns, as these calculations include more the companies view instead of the market view See Q 18.2 for assets / liabilities. It is inconsistent not to equate market value to discounted cash-flows arising from the assets / liability. As for new business, see Q. 18.6 (five years).
Image of page 61
Image of page 62
  • Winter '14

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes