8.1.1. Value of Insurer’s assets to match its Insurance Liabilities

(1) An Insurer must hold supporting assets of a value at least equal to the amount of its Insurance Liabilities.

(2) Such asset must be of a sufficient amount, and of an appropriate currency and term, to ensure that the cash inflows from the assets meet the expected cash outflows from the Insurer’s Insurance Liabilities as they fall due.

8.1.2. Projecting cash flows - treatment of options

In determining the expected cash outflows from its Insurance Liabilities for the purposes of PINS 8.1.1, an Insurer must take into account any options that exist in the Insurer’s Contracts of Insurance including:

• (a) any unilateral option available to the policyholder to extend a Contract of Insurance; and
• (b) any unilateral right available to the Insurer to either cancel or renew a Contract of Insurance.

8.1.3. Projecting cash flows - Long-Term Insurance Business

In projecting cash flows in relation to Long-Term Insurance Business for the purposes of PINS 8.1.1, an Insurer carrying on Long-Term Insurance Business must take into account the nature of the projections and the factors relevant to its Long-Term Insurance Business, including:

• (a) expected investment earnings;
• (b) expected reinsurance recoveries;
• (c) mortality and morbidity;
• (d) expenses;
• (e) options and guarantees; and
• (f) persistency.