Assumptions

 The corrected claims data does not contain any further errors.
 All claims incurred during the investigation have been reported.
 The exposure data provided by the Insurance Company have been calculated correctly.
 Policies are uniformly distributed by age across each age band. Hence the average age
 for polices can be taken as the mid point of each age band.
 The experience investigation has been performed on a pool of business whose experience
is expected to be comparable to the experience expected on this portfolio. In particular:
 The gender mix in the experience investigation is similar to that in the new portfolio
 The smoker mix in the experience investigation is similar to that in the new portfolio
 There was no unusual event (e.g. catastrophe or pandemic) during the investigation period
 No allowance has been made for mortality improvements between the end of the
experience investigation and the start of the cash flow projection.
 No mortality improvements are allowed for in the cash flow projection.
 It is assumed that premiums will be paid at the start of each year.
 The expected new business mix will be achieved and a total sum assured of $220m will
be written in 2016.
 The internal mortality table is an appropriate table to compare the experience against.
 No allowance is made for expense inflation or changes in capital requirements.
 The gender mix used to derive the internal mortality table is consistent with the gender

 Assume that the portfolio data provided is correct and contains no errors.
 Assume that the age definition for the female mortality table is age exact.
 Assume that births are uniformly distributed over the calendar year, so that age nearest
(in-force portfolio age definition) is on average equivalent to age exact.
 Assume that ages are uniformly distributed within each age group, so that the average
policyholder age will be the mid-point of the age group.
 Assume that all annuities are level, i.e. the same amount with no increase or decrease
from year to year.

 Within the age group 100+, assume that the average age is 105.
 Assume a maximum possible age of 120, namely q(120) = 1.
 Assume that the entire portfolio will be female. Over 95% of the portfolio is female and
this will be prudent if female mortality is lighter than male mortality.
 Assume that no-one will enter or leave the portfolio between the effective date of the
portfolio data and the start date of the longevity swap.
 No allowance is made for ageing between the effective date of the portfolio data and the
start date of the longevity swap. This will be prudent.
 Assume that tax and reserving costs can be ignored.
 Assume that the insurance company’s mortality and improvement assumptions are
appropriate for the portfolio under consideration.
 Assume that the mortality improvement rates are unchanged throughout the projection
period (i.e. improvements do not accelerate or decelerate).
 Assume that the mortality improvement rate is the same for all ages.
 Assume that the longevity swap cash flows (including expenses) occur at the start of each
year.
 Assume that the level of variable expenses remains appropriate.
 Assume that fixed expenses increase by 3% each year (i.e. past inflation is a good guide
to future inflation, and that the inflation rate is constant in each future year).
 Assume that there are no guarantees or additional benefits payable on death.

 Other than identified errors, the data provided is correct.

 Past performance (charity triathlon) is a good guide to future performance (Minister’s
 triathlon).
 The race time for the Minister’s triathlon is only dependent on the race time achieved in
the charity triathlon e.g. no further training will impact the results.
 The provided relationship between speeds in the charity triathlon and those in future races
gives a good estimate for speeds in the Minister’s triathlon.
 Transition times are independent of the length of the preceding stage.
 Transition times in the Minister’s triathlon will be the average of T1 and the average of
 T2 times achieved in the charity triathlon (or other sensible assumption, e.g. individual
transition times are the same as those for the charity race).
 The competitors who performed in the charity race performed to their best level.
 The 30 athletes registered for the Minister’s triathlon include the top 10 competitors in the
charity race i.e. there will be no injuries impacting the ability of competitors to race.
 The performance of each competitor is independent between races and independent of
other competitors.
 Expenses incurred will be at the level incurred in recent years.
 If any of the top 3 placed competitors in the Minister’s triathlon have times in excess of 3
hours, the prize money awarded to that competitor will be 0.
 The prize money is calculated using the exact time pro-rating between whole minutes.
 (or other sensible assumption, e.g. rounding down to nearest integer minute).

 Contributions are assumed to be received on average half way through the year of age.
 Salary is assumed to increase annually on the individual’s birthday. 100% equities are
assumed to be used for investment periods more than 11 years from retirement age.
 The individual is assumed to use all of the investment pot to purchase an income.
 The individual is assumed to die between age 87 and before his 88th birthday so that no
income is paid out at age 88.
 The income calculated is as at the individual's retirement age i.e. it is given as a future
value not in terms of today's prices.
 The rate of employer and individual/employee contributions is assumed to remain
constant.
 Fixed rate returns are reasonable for the duration of the investment.
 Under the existing approach the income reflected is a gross income.
 The parameters given provide a reasonable basis on which to build illustrations.
 The average salary in Actuaria does not change between now and the start of the
 projection.
 Retirement income from the fund is assumed to be taken as a lump sum at the beginning
of each new year of age (including the year of retirement).
 Income is withdrawn from the each asset class in proportion to the value of each asset
class.
 Under the existing approach it is assumed the income purchased is a level income for the
individual only (i.e. no spouse's benefits). This enables a valid comparison with the
income from the new approach.
 Contributions are payable monthly.
 The rate of salary inflation will remain constant at the level experienced in recent years.

 Pass rates do not vary over time.

 Pass rates are independent over time periods / number of previous attempts, i.e. the
probability of a student passing an exam is independent of previous success rates whether
they have sat it before.
 Every student sits an exam at each possible opportunity / no sickness absence.
 Every student has to pass all N exams; there are no exemptions granted.
 Results are known before the half year end, so a student passing the Nth exam at the final
half year will count as qualified by the end of the projection period.
 No students withdraw in the first half year.
 Withdrawal rates are constant over the projection period.
 Withdrawal rates are not affected by other factors, e.g. employment opportunities.
 Membership lapses due to deaths can be ignored (or can be assumed to be included in the
withdrawals).

 Assume that 21 is the limiting age under all scenarios.

 Assume that the mortality rate data provided is correct and contains no errors.
 Assume that the analysis would show similar results for female dogs.
 Assume that the mortality improvement factor of 20% indicated by PetCo is valid.
 Assume that mortality improvements start immediately, i.e. as soon as the food is
 Assume that the mortality improvement factor is constant over time.
 Assume that the mortality improvement factor is the same for all ages.
 Assume that the same mortality improvement factor is applicable to each breed
 Assume that the dogs do not eat the food at ages lower than 2.

 The past investment returns are a good indication of future performance and volatility.
 The funds will track the indices perfectly other than for the annual management charge.
 Investments all happen on Mr Brown’s birthday.
 The annual investment will always remain at £1,000. It will not increase over time.
 Fund rebalancing happens at the end of each period and there is no cost for doing this.
 Investment expenses and charges are ignored other than the annual management charges.
 Tax implications are not considered.
 The AMCs stated under the original and low AMCs scenarios are available for the term
of the investment.
 Mr Brown only invests in equities and bonds. No other investments or indices are used.

 Other than identified errors, the data provided is correct.

 Current levels of inflation are a good guide to future inflation.

 The interest rate curves provided by CB are a good guide to future interest rates.

 The CB will not change the structure of the mortgages on offer in the next 25 years.

 Mr Rae will be able to purchase the property he would like for $350,000.
 There are no additional costs when purchasing the property which might affect the level
of mortgage Mr Rae requires.

 There are no additional outgoings which will affect the level of the Rae’s savings.

 Mr and Mrs Rae will remain in their jobs, earning a consistent level of income, not
achieving any significant promotions to increase the income above annual inflation.

 Income tax rates will not change.

 The savings fund will having an opening balance of $0.

 No interest will be earned on the savings fund.

 The cost of renovations will not change with inflation

 Children are expected to join and leave on average half way through the year.

 The leavers decrements apply equally to existing members as they do to new joiners.

 The age of the children is expected to change at the start of the financial year.

 Children are expected to attend 52 classes a year.

 The maximum age a child can attend a class is 4.

 Inflation is assumed to be 0% for the next 10 years.

 Children are assumed to start and leave in whole numbers, therefore new starters are
rounded up to whole numbers and leavers are rounded down to whole numbers.

 Profits are not affected by taxation.

 There are no costs associated with providing the franchise opportunities.

 The opening of franchises are independent of one another. Each additional franchise will
not affect the running of any existing businesses.

 Any franchise opened starts operation at the beginning of one of Sally’s financial year.

 The decrements provided (and formulaic adjustments proposed) are suitable for the
projection of the population.

 The decrements and charges are independent of sex.

 The movement of children (starting and leaving) are independent of one another.

 Sally is able to sell franchises whenever she chooses to.

 The change to the starting decrements is appropriate given the proposed change to the
class fees.

 The probabilities for the claims provided for modelling individual claim numbers are
appropriate and complete.

 Claim amounts follow the lognormal distribution as specified.

 No allowance for inflation is required i.e. the claim amount figures provided have already
have been inflation-adjusted to an appropriate level for the forthcoming year, or
alternatively inflation is low enough to be ignored.

 Individual claim amounts are independent, and so correlations between the amounts paid
under claim events arising during the year can be ignored.

 All claim events are covered by the reinsurance arrangements.

 All motorists are equally likely to make a claim.

 The reinsurance company does not default on the payment of any recoveries.
 There is no delay between SMIC incurring a claim and recovering the amount from the
reinsurer i.e. no reporting delays are modelled.

 All expenses are settled at the end of the day in which they are incurred.

 The one-off transportation expenses are paid at the start of the relevant part of the
journey.

 The revenue received at the market is uniform across the two days and is deposited in a
bank at the end of each day.

 No interest is earned on the revenue deposited in the bank.

 Inflation of the price of felt sheets can be ignored, as we are told that historically there has
been very little inflation in Actuaria.

 Apart from the moths and the rugby players, no other decrements apply.

 Once the moths enter the factory, the moths are removed/destroyed

 Under the alternative scenario, the black felt sheets are more likely to be stolen, so the
daily theft decrement is assumed to be 4%, whereas the daily theft decrement for the red
and green felt sheets is each assumed to be 1%.
• The provided values for the drift coefficient and diffusion coefficient are appropriate for
modelling the ASE over the next 20 years (i.e. the next 20 years are expected to be
consistent with the last 5 years).
• It is assumed that it is appropriate to use constant drift and volatility coefficients
throughout the 20 year projection period.
• It is assumed that it is appropriate to treat each increment of the index as being
independent, e.g. that market corrections can be ignored.
• Nothing will happen between the date of modelling and the launch date of 2018 to
invalidate the choice of model or assumed parameters.
• 100 simulations is a sufficiently large number of simulations for analysis of the potential
maturity values.
• The average amount invested in Life Co’s product will equal the current average amount
invested in such policies – no allowance is made for inflation between now and the
launch date of 2018.
• It is assumed the initial charge is applied immediately so that the amount invested in the
ASE 100 at t = 0 is the invested amount net of the initial charge.
• The mortality of the policyholder is ignored.
• Any potential withdrawals are ignored.
• Any potential top-ups are ignored.
• Assume that the interest rate on the mortgage will remain fixed throughout the life of the
mortgage (with the exception of the known change on Product 2).
• Assume that rental inflation remains at 0% per annum throughout the duration of the
investment.
• Assume that monthly mortgage repayments occur at the end of each month.
• Assume that this particular property’s value increases at 3% per annum over the term of
the investment.
• Assume that the property’s true value can be achieved in a sale.
• Any tax on rental income has been ignored.
• The data and parameters provided are all assumed to be correct.
• Assume that a tenant willing to pay $1,700 per month can be secured.
• Assume that all other monthly cash flows occur at the start of each month.
• Assume that the identified property will be available to purchase and that the price paid
will be $300,000.
• Assume that tenants can be secured immediately and there will be no periods during the
investment term when there is no tenant.
• Assume that the planned efficiencies are achieved and expenses remain at $400 per
month throughout the investment.
• Assume that there are no exceptional expenses incurred over and above the $400 per
month.
• Assume that no overpayments are made on the mortgage.
• Assume that no payment holidays are taken on the mortgage.
• Assume that proceeds from the property’s sale will be received immediately at the end of
the investment.
• Purchase costs such as stamp duty and solicitor fees have been ignored.
• Any costs associated with selling the property have been ignored.
• Any arrangement fees on the mortgage have been ignored.
• For the additional scenario it is assumed that expense inflation will be constant
throughout the term of the investment.
• For the additional scenario it is assumed that expenses will inflate on the yearly
anniversary of the investment.
• There are no reasons to doubt the accuracy of the data. We assume therefore that the data
provided is correct.
• Current levels of inflation are a good guide to future inflation.
• Course details remain the same over the course of our projections, particularly the level of
fees charged.
• The structure of the loan repayments will not change over the projection period.
• University fees are payable at the start of each academic year.
• Taxes can be ignored for the purpose of our projections.
• Students are assumed to make the repayments due, no allowance for defaults.
• It is appropriate to allow for level salary increases (post university) of 5% p.a.
• Salary is expected to be paid, on average, half way through the year.
• Students are assumed to continue to repay their loans for all of their future working
lifetime. No allowance for withdrawal for any reason including death.
• Students will only complete one course and therefore only have student loans for the fees
of that one course.
• Under the alternative structure, students can make payments equal to a given percentage
of their salary, without the need for any adjustments.
• The directors are assumed to remain employed and are assumed to continue to
accumulate pension benefits within the GP PS for the duration of the projections.
• The benefits provided by the GP PS are assumed to remain unchanged for the duration of
the projections.
• Contributions are, on average, payable halfway through the year.
• The GMA increases each year over the course of the projections in line with
inflation A. It is assumed that the Government do not change this allowance.
• Mr Potter can make fixed, level contributions rather than salary related
contributions to his DC pension fund.
• Restrictions aren’t imposed on the accumulation of benefits once their value exceeds
the GMA.
• The GP PS continues to offer benefits on the same principles to those currently in
force over the course of the projections.
• Mr Potter remains employed at GP Ltd and within the GP PS until he retires.
• Mr Potter retires at the end of the calendar year in which he has his 60th birthday,
not earlier or later.
• There is no flexibility with how DC pension funds are invested and therefore the
investment returns assumed are reasonable for all members.

 105 is the limiting age under all scenarios.

 The mortality rate data provided is correct and contains no errors.

 The mortality improvement factors indicated by the Department of Health are valid.

 The mortality improvements start immediately, i.e. as soon as the health campaigns start.

 The mortality improvement factors are constant over time.

 The mortality improvement factors are the same for both sexes.
  The mortality improvement factors follow the same pattern for all ages.

 The health campaign effect will be sustained indefinitely.

 5% is an appropriate interest rate to use for the annuity due factors.

 Annual annuity-due factors at age 65 are sufficient for the Department of Pensions’
purposes, i.e. that there is no requirement to consider more complex factors such as those
including a spouse’s pension or for older ages.

 The Regulator does not update the factors given.

• The Expected Profit is calculated before any tax would be payable on future profits.

• The Reinsurer will accept any proportion of motor business and 50% of property business.

• There is no restriction on the size of the dividend that GIL can declare.

• All premiums are earned in the year that they are written.

• Taxes can be ignored for the purpose of our projections.

• Margins are stable for future periods and are not reduced due to increased competition.

• There are no additional annual outgo arising from the new campaign.

• No other unexpected outgo will arise in the next 15 years (e.g. unexpected legal or regulatory
costs or new causes to support)

• The level of annual inflation is appropriate and is assumed to remain constant over the course of
the projections.

• Cashflows are assumed to occur, on average, half way through the year.

- No new children join Baby Days to replace those who have reached 5 years old.
- Children will only leave Baby Days as a result of attaining age 5 – no children will leave
Baby Days as a result of relocation of parents/carers.
- No external government funding will be provided to Baby Days to compensate for the
lost income for children aged 3 years and older.
- There are no cheaper alternative sources for food or diapers.
- Average number of diapers used per day is representative of the daily usage.
- Cost per diaper to Baby Days is not dependent on the age of the child.
- The increase in daily fees will not result in parents/carers moving their children to another
childcare provider.
 - Inflation rate is representative for both diaper costs and salary costs over the next two
years.
- It is reasonable that Baby Days will not incur any additional costs from providing the
activities.
- Demand for the activities will be in line with expectations irrespective of the activity fee.
- No other costs should be taken into account e.g. rent, heating costs, substitute employees
to cover periods of sickness.

 Premiums do not escalate, and remain level over time.

 The simplified pricing basis (including a flat mortality rate) is appropriate for the
purposes of this investigation
 Exit and mortality rates apply linearly over the course of the year, and are independent of
each other.
 The ongoing expense applies monthly, from the first month of the policy.
 The fund charge applies to the fund value at the end of each month.
 Sales take place on the first day in the year, and profit figure is given as at that date.
 Initial expenses include all charges involved with launching this product i.e. including
marketing costs, sales costs.
 The discount factor proposed is suitable to determine the profitability of the product and it
is reasonable that this remains fixed over the policy term.
 The new regulations on Exit charges apply immediately and there is no transition period.
 Sunset Life will levy the maximum possible charge under the new regulations.
 The change in charging structure of the product will not affect sales levels in the future.
 The change in exit charges will not change the number of policies lapsing through
withdrawal or early retirement.
 There will be no future changes to Government regulations.
 The sales figure provided by the Marketing Actuary are realistic, and are appropriate for
use in the pricing process.
 The Low, Medium and High Premiums chosen are a good representative of the new
policies that will be sold.
 There will be an even split of new business premium across the nine sample policies
chosen.
 The three terms chosen are suitable for pricing potential future product sales.

 Except for the data items that have been corrected below in the data checks section, there are
no reasons to doubt the accuracy of the data. We assume therefore that the data provided is
correct.
 All the candidates are assumed to have taken the test. There were no absences on the test date.
 It is possible for a candidate to score the full 60 marks in the test.
 It is possible for a candidate to score no marks in the test.
 The method that is used to calculate the grant being awarded is fixed and will not change.
 There are no additional funds available to be provided in the grant except for the base grant
and the monies available for the grant per pupil.
 The £75,000 grant available next year is fixed and cannot be changed.
 There will be no new schools opening in the city in the next year.
 The % levels that must be scored in order to achieve the expected and higher standard are
fixed and cannot be changed.
 The take up rate of both the proposals would be as Martin estimated.

 Inflation is assumed to remain constant each year until all members are expected to have died.

 No individuals die before reaching retirement and therefore no mortality assumption before
retirement is required.

 There are no increases to pensions prior to retirement other than those already allowed for in
the pension summaries at retirement

 There is currently no option for individuals to take any of the pension as a cash lump sum at
retirement or exchange their benefits in any other way (other than the two proposals under
consideration).

 All individuals retire on 1 January in the year in which they turn 65 years old and early or late
retirement for any reason is not possible.

 No pension is payable after death to an individual’s dependants or spouse

 There are no regulations that restrict Automake from undertaking either proposal

 Automake have sufficient liquid funds to pay the expected lump sums under the LS proposal
based on Martin’s predicted take up rate at 1 January 2020

 No consideration of the impact on Automake’s company accounting figures is considered

 All 10,000 vines will be exposed to the same conditions and the number of grapes which
grow on each grape will be the same per vine.
 The number of sunshine hours follows the Uniform Distribution with a mean of six hours
of sunshine throughout the whole period over which the grapes are grown.
 Number of sunshine hours only impacts the number of grapes grown – it is assumed that
we do not need to consider the size and the acidity of the grapes.
 The assumed spoilage rate of 10% is appropriate for both vineyards.
 There are no taxes that need to be considered in relation to the sales of wine bottles and
the rental costs of the vineyard.
 Under the base scenario, the grapes can be harvested by the workers within a reasonable
time period irrespective of the number of grapes grown.
 All cashflows will occur within a relatively short period of time and so there is no need to
discount cashflows or consider inflation.
 The cost of producing the wine bottles covers all costs, including employment costs and
maintenance costs.
 There will be 10,000 vines in the vineyard in the alternative region.
 20 workers will also be available to harvest the grapes in the alternative region and this
will be sufficient workers to harvest all the grapes irrespective of the weather conditions.

- Data provided by ABC is correct and accurate for modelling purposes

- Number of parcels are rounded down to nearest integer
 - 100 simulations is sufficient to provide a good indication of possible options to draw
conclusions on profitability of the Company.
- Delivery of parcels is within an area that the drivers can make all the deliveries allocated
to them
- No other expenses incurred by ABC Parcel Delivery Company e.g. no overheads to store
parcels or get them to the delivery drivers
- The total number of 550 parcels is guaranteed every day and no seasonal fluctuations
- No new entrants to the parcel delivery market which would change the availability of any
of the drivers

 The data adjustments proposed are appropriate.

 The scholarship awards are valid for next year (equivalently, no inflation of these amounts).
 All competitors from the information provided will compete in the national trials.
 No other athletes will compete in the trials.
 The athletes’ performances will not change materially between the date of the historic data
and the trials.
 The scores per competitor between cards are independent and identically distributed.
 All information provided about the trials is correct.
 The use of the exponential distribution and the adjustments to simulate the scores at longer
distances are valid.
 Each competitor offered a place in the national team will accept it.

 There are no other charges associated with the investment or guarantees.

 The past performance data is suitable for projecting for the next ten years.
 Future investment returns follow a normal distribution.
 All charges are applied annually in arrear, unless stated otherwise.
 The original investment of $100,000 is also within the scope of the annual guarantee, i.e. a
fall of more than 20% in year one would trigger the guarantee.
 That 100 scenarios are sufficient to produce statistically reliable results.
 No allowance is made for the counterparty risk with the investment company providing the
guarantee.
 The impact of tax on scenarios with positive results is not included.

 The annual returns are independent of each other over time.

 Assume that apart from the data errors discovered, the policy data supplied is correct
 Assume that annual returns provided are earned uniformly throughout the year.
 Assume that monthly premiums are paid, on average, half-way through the year.
 Assume that a 5% tolerance level is appropriate to determine whether the policy fund
value provided is correct
 Assume that the sample policies provided are a representative selection of all 8000
policies.
  The number of claims between $0 and $50, i.e. claims not reported, is in line with the
number you would expect from the exponential distribution with parameter 0.01.
 Premiums received and initial expenses are assumed to occur at the beginning of the
month.
 Monthly expenses are assumed to occur uniformly over each month and therefore can be
assumed to occur half way through the month.
 Claims are assumed to be paid out at the end of each month.
 The reserve will released at the end of the policy year and there will be no change in the
reserve amount over the policy year.
 Even if a claim is slightly over the excess amount, all policyholders will still submit the
claim.
 The claims data received from NW does not need to be adjusted for inflation.
 The expenses quoted do not need to be adjusted for inflation.
 No policies will lapse over the policy year.
 The approximation for the expected incurred claim continues to be appropriate even if the
policy excess is changed.
 AH will sell 10,000 policies in the 2021 policy year and the characteristics of the
customers that AH will attract will be similar to that of the policyholder of NW.
 The number of claims for AH’s policies sold will follow the same distribution as those
experienced by NW.
 Demand for the policies will not be impacted by any change in policy premium or policy
excess.

 Other than the data changes described in ‘Data checks’ worksheet the data is accurate.
 The battery storage capacity is accurate, for example there is not a natural variation between
batteries with 12.5 kWh being the average advertised by the manufacturer.
 The battery cannot discharge below 0 kWh. i.e. the minimum capacity is 0 kWh
 The expected lifetime of the battery is correct. There is no possibility of a shortened life
which would affect the IRR calculations.
 The electricity usage and solar electricity generation data from the 2020 calendar year is a
good representation of future calendar years during the batteries working lifetime. They will
not be affected by heatwaves, cold winters or a change in lifestyle affecting the electricity
usage patterns.
 Naomi has sufficient funds to purchase the battery.
 The battery can be installed in working order by 1 January 2022.
 There is no possibility of a battery or solar panel malfunction over the 20 year assumed
battery working lifetime.
 The battery is compatible with the solar panels already installed.
 The electricity inflation assumptions are within reasonable ranges and the fixed or linear
increasing patterns assumed are both acceptable.

 Data provided is valid for use

 No allowance is made for mortality improvements in the future
 No allowance for expense inflation
 No competition in market to prevent level of sales of products
 Regulator will support expansion of the business to diversify products
 Minimum Capital Requirement calculations are not expected to change in the near future
aside from the rumoured scenario.
 We do not expect extra sales of the term assurance products during the analysis period
considered
 Assume expense levels don't change from the flat rate per policy even though the
portfolio diversifies into different product structures
 Discount rate of 3% per annum is appropriate for the market conditions and for all terms
 No allowance made for investments of the company and therefore any market stress
scenarios linked to asset-liability matching
 No lapses of policies
 Assume premiums are paid up front and not part of the future cashflow projections

• Fuel usage does not depend on the weight of the aircraft

All aircrafts are operational throughout the entire year (i.e. no down time)
Past data (passenger occupancy rate and weather) is a good indicator to future performance
for this exercise
No inflation or other taxes are allowed for
The fuel cost is hedged and remains constant for the year
Other than the seasonal adjustment, the ticket prices are constant throughout the year
The crew will work as expected throughout the year (e.g. no sick days or strike actions)

• The claims data provided by DEF Insurance is complete and accurate.

• The claims inflation data provided is suitable for use for DEF Insurance’s business.
• Claims are assumed to be evenly spread over the year and the claims inflation data is
consistent with that, so no calendar adjustment is required.
• The policy is for six years and we assume that all outstanding claims are settled in the final
quarter.
• There are no concentrations of risk which are vulnerable to a natural catastrophe event.
• DEF Insurance’s exposure to commercial property insurance has been stable over the last 20
years.
• DEF Insurance underwriting policy has been consistent over the last 20 years.
• The premium is paid up front and is free for ABC Re to invest.
• There is no reason to believe events between 2022 and 2028 will differ materially from
those experienced over 2001 to 2020.

 The random numbers provided are suitable to simulate the variations in interest rate
during the savings phase of the product.
 The formula for the movement in the variable interest is accurate and will apply for the
full two-year projection.
 The monthly deposits into the savings account have been assumed to be made in advance.
  Customers will make the saving payment during each month of the savings phase and
there will no withdrawals.
 Customers only use the funds they will have in the savings account of the product towards
their house purchase i.e. no additional funds are used for the house purchase (like some
other savings).
 The marketability of both products is similar.
 There is no need to consider defaults on mortgage repayments.
 There is no regulations that prevent the setting interest rates under the proposed
approaches.
 No additional costs need to be considered for the purchase of the home i.e. bank fees,
solicitor fees.
 Mortgage repayments have been assumed to be made in arrears.
 There will be no increase in house prices between the inception of the product and the end
of the two-year savings period.
 Customers will be able to afford the increased monthly saving amount for the alternative
product.

 The model provided by the statistics department for the relationship between pizza sales and
GDP is suitable to model the demand for pizzas over the next ten years (i.e. pizza sales are
related to GDP and the parameters are appropriate).
 The costs and selling prices of pizzas provided by Mr Rolfe are suitable for the next ten years
and no allowance for inflation is needed.
 The time series GDP projection model created by Business Planning Ltd gives a fair
representation of the ten-year expected distribution of GDP p.a..
 There are no other costs associated with the change to the luxury strategy.
 No allowance is made for any investment returns on profit.
 No factors other than GDP and strategy type influence the number of pizzas and sides sold,
for example local competition, changes to healthy eating is not considered.
 ‘Fresh Pizzas’ has sufficient funds to invest in the development costs for either the ‘luxury’
strategy or to introduce side orders.
 That 100 simulations are sufficient to produce statistically reliable results.
 The impact of tax on scenarios with positive profit is not included.
 The values of the GDP index are only dependent on the previous year’s GDP index value.
 Pizzas and side orders are only sold in the ratio of one pizza plus one side or one pizza plus
no sides, no other combinations are considered.
 Fresh Pizza is open for all 365 days throughout the year and does not close for any holidays.
 No other products, for example drinks are considered.
 No special offers are considered.

 No transaction costs are considered.

 Where a strategy requires looking at prices prior to the current date, for days in early
January 2021, this has been done by going back to December 2020 prices.
 There is no limit on the time that a short selling transaction can be held for.
 The return for a given day is the movement from the price of the previous day to the price
of the given day.
 50 day and 200 day moving averages ignore weekends and public holidays.
 The final day of the year is 30/12/2021.
 The method of identifying annuitants who would be worse off by using the net present
value of the remaining annuity payments before and after amendment is acceptable under
all regulations and fair to annuitants.
 Annuitants cannot cancel their annuities.
 Annuitants cannot change the term, amount or increase rate of their annuities once the
policy has started (other than the required legislation changes).
 Annuitants cannot decide whether or not to accept the legislation changes.
 There are no other new changes in legislation affecting the annuities.
 XYZ Insurance remains solvent and does not default on the annuities.

 There is no allowance for mortality before the end of each annuity’s term.
 The data is complete and correct. In particular, the calculation of the fraction of the
annuity payment affected by the change in legislation.
 Any other annuities in payment with XYZ Insurance, other than the 100 analysed, are not
affected.
The amendment is only required from 1 January 2023 and will not need to be backdated