TaxTMI 
TaxTMI 
refer clause (b) of sub-regulation (1) of regulation 5
X X X X Extracts X X X X
X X X X Extracts X X X X
....ious factors including but not limited to the reasonable expectations of policyholders (with regard to bonuses, including terminal bonuses, if any) and any established practices of an insurer for payment of benefits. (c) The valuation method shall take into account the cost of any options and guarantees that may be available to the policyholder under the terms of the insurance policy. (d) The determination of the amount of liability under each policy shall be based on prudent assumptions of all relevant parameters. The value of each such parameter shall be based on the insurer's expected experience and shall include an appropriate margin for adverse deviations (hereinafter referred to as 'MAD') that may result in an increase in the amount of mathematical reserves. (e) The amount of mathematical reserve in respect of a policy, determined in accordance with clause 2(1)(d) hereinabove, may be negative (called 'negative reserves') or less than the surrender value available (called 'surrender value deficiency reserve') at the valuation date. Note: (i) The surrender value for this purpose shall be higher of special surrender value and guarante....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed on current practice of the insurer). No allowance shall be made for non-payment of commission in respect of orphaned policies. (c) policy maintenance expenses, if any, in respect of a policy, as provided under clause 2(4)(c) herein; (d) allocation of profit to shareholders, if any, where there is a specified relationship between profits attributable to shareholders and the bonus rates declared for policyholders Provided that allowance must be made for tax, if any. (3) Policy Options and Guarantees: Where a policy provides built-in options that may be exercised by the policyholder, such as conversion or addition of coverage at future date(s) without any evidence of good health, or guarantees, such as annuity rate guarantees at maturity of insurance policy, investment guarantees etc., the costs of such options or guarantees shall be estimated and treated as special cash flows in calculating the mathematical reserves. (4) Valuation Parameters: (a) The valuation parameters shall constitute the bases on which the future policy cash flows shall be computed and discounted. Each parameter shall have to be appropriate to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nto account- a. the composition of assets supporting the liabilities, expected cash flows from the investments on hand, the cash flows from the block of policies to be valued, the likely future investment conditions and the reinvestment and disinvestment strategy to be employed in dealing with the future net cash flows; b. the risks associated with investment in regard to receipt of income on such investment or repayment of principal; c. the expenses associated with the investment functions of the insurer; (ii) shall not be higher than, for the calculation of present value of policy cash flows in respect of a particular category of insurance policies, the yields on assets maintained for the purpose of such category of contacts; (iii) in respect of non-participating business, shall recognize the risk of decline in the future interest rates; (iv) in respect of participating business, shall be based on the assumption (with regard to future investment conditions), that the scale of future bonuses used in the valuation is consistent with the valuation rate of interest. (e) Lapse rate, if considered for valuation, should be a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vii) Any future negative cash flow shall be appropriately provided for by setting up reserves; and negative reserves, if any, shall be set to zero. Explanation: General (non-unit) fund reserve under unit linked policies shall be considered as reserve for non-linked non-participating business for the purpose of investment norms, distribution of surplus etc. (6) Additional Requirements for Variable Linked Business: (a) Reserve in respect of variable linked business shall consist of two components, namely, policy account reserves and general fund reserves. (b) Policy account reserves shall be the balance in Policy Account on the date of valuation. (c) General fund reserves shall be determined using discounted cash flow method, which shall take into account of the following, namely:- (i) Premiums, if any, payable in future; (ii) Death benefits, if any, provided by the general fund (over and above the value of policy account); (iii) Management charges paid to the general fund; (iv) Guarantees, if any, relating to surrender values or minimum death and maturity benefits; (v) Policy account growth rat....