Hong Kong Regulations

INSURANCE COMPANIES (DETERMINATION OF LONG TERM LIABILITIES) REGULATION - SECT 5

Method of calculation

(1) Subject to subsections (2), (3) and (4), the amount of the long 
term liabilities shall be determined separately for each contract by a
prospective calculation.

(2) A retrospective calculation may be applied to determine the liabilities
where a prospective method cannot be applied to a particular type of contract
or benefit, or where it can be demonstrated that the resulting amount of the
liabilities would be no lower than would be required by a prudent prospective
calculation.

(3) Appropriate approximations or generalisations may be made where they are
likely to provide the same, or a higher, result than individual calculations
of the same amount of the liabilities in respect of each contract.

(4) Where necessary, additional amount shall be set aside on an aggregated
basis for general risks which are not individualised.

(5) The method of calculation of the amount of the liabilities and the
assumptions used shall not be subject to discontinuities from year to year
arising from arbitrary changes and shall be such as to recognise the
distribution of profits in an appropriate way over the duration of each
policy. (Enacted 1995)