Negative Mathematical Reserves


A firm may calculate a negative value for the mathematical reserves in respect of a contract of long-term insurance provided that:

  1. (1) this is based on assumptions which meet the general requirements for prudent assumptions as set out in 3.1;
  2. (2) the contract does not have a surrender value which at the actuarial valuation date is guaranteed; and
  3. (3) the total mathematical reserves established by the firm have a minimum value of at least:
    1. (a) where the firm's contracts of long-term insurance include linked long-term contract of insurance, the sum of the surrender values of all its linked long-term contract of insurance at the actuarial valuation date; and
    2. (b) in any other case, zero.