4
Preliminary Calculation of TMTP Method Items
4.1
Chapter 4 has effect for determining:
- (1) where a firm elects to calculate a dynamic portion, the dynamic insurance and reinsurance obligations; and
- (2) the values of ‘ZA’, ‘ZB’ and ‘C0’ in the TMTP method.
- 31/12/2024
4.2
When applying the TMTP method for the first time, a firm must perform the following steps in sequence:
- (1) If it so elects, designate specific MA-eligible insurance and reinsurance obligations in respect of which the dynamic portion will be calculated.
- (2) Calculate the base TMTP so that it satisfies:
\[0\le \mathrm{T}_0\le(\mathrm{X_N}-\mathrm{Y_N})(1-\frac{\mathrm{N}}{16})\]
where:
T0 = | base TMTP; |
XN = | the amount of the firm’s technical provisions to which the TMTP Permission relates, as calculated as at 31 December 2024, less amounts recoverable (if any) from reinsurance contracts and special purpose vehicles. Where a matching adjustment or volatility adjustment is applied to those technical provisions, the amount of the firm’s technical provisions must take into account the matching adjustment or volatility adjustment, as calculated as at 31 December 2024; |
YN = | an amount equal to the amount of the firm’s technical provisions to which the TMTP Permission relates, calculated as at 31 December 2024 in accordance with INSPRU 7, applied as at 31 December 2024, less amounts recoverable (if any) from reinsurance contracts; and |
N = | represents the years from 2016 to 2032. N takes integer values from 0 to 16, so that 2016 is year 0, 2017 is year 1, 2018 is year 2, and continuing until 2032 which is year 16. |
- (3) Express the base TMTP as:
\[base\ TMTP=(\mathrm{A_0+B_0+C_0})\]
where:
A0 = | the amount of the base TMTP attributable to the risk margin portion; |
B0 = | the amount of the base TMTP attributable to the dynamic portion; and |
C0 = | the amount of the base TMTP attributable to the non-dynamic portion. |
- (4) Calculate ‘ZA’ as follows:
\[\frac{\mathrm{A_0}}{\mathrm{D_0}}\]
where:
A0 = | ‘A0’ as defined in 4.2(3); and |
D0 = | the amount of the risk margin portion calculated as at 31 December 2024. |
- (5) Calculate ‘ZB’ as follows:
\[\frac{\mathrm{B_0}}{\mathrm{E_0}}\]
where:
B0 = | ‘B0’ as defined in 4.2(3); and |
E0 = | the amount of the dynamic portion calculated as at 31 December 2024. |
- 31/12/2024