Annex 1
THE SOCIETY'S REASSURANCE ARRANGEMENT, RELATED
TO GARs
A reassurance treaty was arranged by the Society
with a large professional reassurer late in 1998 with the objective
of supporting the Society's regulatory reserves. This treaty was
negotiated after full discussion with the Government Actuary's
Department ("GAD") and was accepted by them for the
purpose intended. Such reassurance is one of a range of normal
methods available for the adjustment of known adverse features
of the regulatory reserving basis.
The purpose of the particular reassurance treaty
was to allow the Society to benefit from its actual, very low,
take up of GARs while remaining properly prudent in regulatory
reserving terms. The existence of the reassurance allowed the
Society to follow the guidance issued by GAD to appointed actuaries
in January 1999 on reserving for GARs. That guidance required
companies to allow for a potentially high take-up of GARs while
recognising that this was unlikely. The treaty contract permitted
the Society, prior to the House of Lords' decision, properly to
benefit from its favourable effect on the regulatory balance sheet.
The reassurance terms were renegotiated after
the House of Lords' decision and remain in force. No claim has
been made under the treaty. In the event of a claim, the amount
would be recoverable from the Society by the reassurers from future
earnings, provided that there are sufficient surplus earnings
beyond those needed to support regulatory reserves.
5 February 2001
The following is the text of the Equitable Press
Release, issued at 07:00 on Monday 5 February 2001.
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