The Insurers (Winding-Up) Rules (Northern Ireland) 2005

Rule 6

SCHEDULE 1Rules for valuing general business policies

1.—(1) This paragraph applies in relation to periodic payments under a general business policy which fall due for payment after the liquidation date where the event giving rise to the liability to make the payments occurred before the liquidation date.

(2) The value to be attributed to such periodic payments shall be determined on such actuarial principles and assumptions in regard to all relevant factors as the High Court shall direct.

2.—(1) This paragraph applies in relation to liabilities under a general business policy which arise from events which occurred before the liquidation date but which have not—

(a)fallen due for payment before the liquidation date; or

(b)been notified to the company before the liquidation date.

(2) The value to be attributed to such liabilities shall be determined on such actuarial principles and assumptions in regard to all relevant factors as the High Court shall direct.

3.—(1) This paragraph applies in relation to liabilities under a general business policy not dealt with by paragraphs 1 or 2.

(2) The value to be attributed to those liabilities shall—

(a)if the terms of the policy provide for a repayment of premium upon the early termination of the policy or the policy is expressed to run from one definite date to another or the policy may be terminated by any of the parties with effect from a definite date, be the greater of the following two amounts:

(i)the amount (if any) which under the terms of the policy would have been repayable on early termination of the policy had the policy terminated on the liquidation date, and

(ii)where the policy is expressed to run from one definite date to another or may be terminated by any of the parties with effect from a definite date, such proportion of the last premium paid as is proportionate to the unexpired portion of the period in respect of which that premium was paid; and

(b)in any other case, be a just estimate of that value.

Rules 7(3)

SCHEDULE 2Rules for valuing non-linked life policies, non-linked deferred annuity policies, non-linked annuities in payment, unitised non-linked policies and capital redemption policies

General

1.  In valuing a policy—

(a)where it is necessary to calculate the present value of future payments by or to the company, interest shall be assumed at such fair and reasonable rate or rates as the High Court may direct;

(b)where relevant, the rates of mortality and the rates of disability to be employed shall be such rates as the High Court considers appropriate after taking into account:

(i)relevant published tables of rates of mortality and rates of disability, and

(ii)the rates of mortality and the rates of disability experienced in connection with similar policies issued by the company;

(c)there shall be determined:

(i)the present value of the ordinary benefits;

(ii)the present value of additional benefits;

(iii)the present value of options; and

(iv)if further premiums fall to be paid under the policy on or after the liquidation date, the present value of the premiums;

and for the purposes of this Schedule if the ordinary benefits only take into account premiums paid to date, the present value of future premiums shall be taken as nil.

Present value of the ordinary benefits

2.—(1) Ordinary benefits are the benefits which will become payable to the policy holder on or after the liquidation date without his having to exercise any option under the policy (including any bonus or addition to the sum assured or the amount of annuity declared before the liquidation date) and for this purpose “option” includes a right to surrender the policy.

(2) Subject to sub-paragraph (3), the present value of the ordinary benefits shall be the value at the liquidation date of the reversion in the ordinary benefits according to the contingency upon which those benefits are payable calculated on the basis of the rates of interest, mortality and disability referred to in paragraph 1.

(3) For accumulating with-profits policies—

(a)where the benefits are not expressed in the form of units in a with-profits fund, the value of the ordinary benefits is the amount that would have been payable, excluding any discretionary additions, if the policy holder had been able to exercise a right to terminate the policy at the liquidation date; and

(b)where the benefits are expressed in the form of units in a with-profits fund, the value of the ordinary benefits is the number of units held by the policy holder at the liquidation date valued at the unit price in force at that time or, if that price is not calculated on a daily basis, such price as the High Court may determine having regard to the last published unit price and any change in the value of assets attributable to the fund since the date of the last published unit price.

(4) Where—

(a)sub-paragraph (3) applies, and

(b)paragraph 3(1) of Schedule 3 applies to the calculation of the unit price (or as the case may be) the fund value,

the value shall be adjusted on the basis set out in paragraph 3(3) to (5) of Schedule 3.

(5) Where sub-paragraph (3) applies, the value may be further adjusted by reference to the value of the assets underlying the unit price (or as the case may be) the value of the fund, if the liquidator considers such an adjustment to be necessary.

Present value of additional benefits

3.—(1) Where under the terms of the policy or on the basis of the company’s established practice the policy holder has a right to receive or an expectation of receiving benefits additional to the minimum benefits guaranteed under those terms, the High Court shall determine rates of interest, bonus (whether reversionary, terminal or any other type of bonus used by the company), mortality and disability to provide for the present value (if any) of that right or expectation.

(2) In determining what (if any) value to attribute to any such expectations the High Court shall have regard to the premium payable in relation to the minimum guaranteed benefits and the amount (if any) an insurer is required to provide in respect of those expectations in any rules made by the Authority under Part X of the 2000 Act.

Present value of options

4.  The amount of the present value of options shall be the amount which, in the opinion of the liquidator, is necessary to be provided at the liquidation date (in addition to the amount of the present value of the ordinary benefits) to cover the additional liabilities likely to arise upon the exercise on or after that date by the policy holder of any option conferred upon him by the terms of the policy or, in the case of an industrial assurance policy, by the 1979 Order other than an option whereby the policy holder can secure a guaranteed cash payment within the period of 12 months beginning with that date.

Present value of premiums

5.  The present value of the premiums shall be the value at the liquidation date of the premiums which fall due to be paid by the policy holder after the liquidation date calculated on the basis of the rates of interest, mortality and disability referred to in paragraph 1.

Value of the policy

6.—(1) Subject to sub-paragraph (2)—

(a)if no further premiums fall due to be paid under the policy on or after the liquidation date, the value of the policy shall be the aggregate of:

(i)the present value of the ordinary benefits;

(ii)the present value of options; and

(iii)the present value of additional benefits;

(b)if further premiums fall due to be so paid and the aggregate value referred to in head (a) exceeds the present value of the premiums, the value of the policy shall be the amount of that excess; and

(c)if further premiums fall due to be so paid and that aggregate does not exceed the present value of the premiums, the policy shall have no value.

(2) Where the policy holder has a right conferred upon him by the terms of the policy or by the 1979 Order whereby the policy holder can secure a guaranteed cash payment within the period of 12 months beginning with the liquidation date, the liquidator shall determine the amount which in his opinion it is necessary to provide at that date to cover the liabilities which will accrue when that option is exercised (on the assumption that it will be exercised) and the value of the policy shall be that amount if it exceeds the value of the policy (if any) determined in accordance with sub-paragraph (1).

Rule 7(3)

SCHEDULE 3Rules for valuing life policies and deferred annuity policies which are linked policies

1.—(1) Subject to sub-paragraph (2) the value of the policy shall be the aggregate of the value of the linked liabilities (calculated in accordance with paragraphs 2 or 4) and the value of other than linked liabilities (calculated in accordance with paragraph 5) except where that aggregate is a negative amount in which case the policy shall have no value.

(2) Where the terms of the policy include a right whereby the policy holder can secure a guaranteed cash payment within the period of 12 months beginning with the liquidation date then, if the amount which in the opinion of the liquidator is necessary to be provided at that date to cover any liabilities which will accrue when that option is exercised (on the assumption that it will be exercised) is greater than the value determined under sub-paragraph (1), the value of the policy shall be that greater amount.

2.—(1) Where the linked liabilities are expressed in terms of units the value of those liabilities shall, subject to paragraph 3, be the amount arrived at by taking the product of the number of units of each class of units allocated to the policy on the liquidation date and the value of each such unit on that date and then adding those products.

(2) For the purposes of sub-paragraph (1)—

(a)where under the terms of the policy the value of a unit at any time falls to be determined by reference to the value at that time of the assets of a particular fund maintained by the company in relation to that and other policies, the value of a unit on the liquidation date shall be determined by reference to the net realisable value of the assets credited to that fund on that date (after taking account of disposal costs, any tax liabilities resulting from the disposal of assets insofar as they have not already been provided for by the company and any other amounts which under the terms of those policies are chargeable to the fund), and

(b)in any other case, the value of a unit on the liquidation date shall be the value which would have been ascribed to each unit credited to the policy holder, after any deductions which may be made under the terms of the policy, for the purpose of determining the benefits payable under the policy on the liquidation date had the policy matured on that date.

3.—(1) This paragraph applies where—

(a)paragraph 2(2)(a) applies and the company has a right under the terms of the policy either to make periodic withdrawals from the fund referred to in that paragraph or to retain any part of the income accruing in respect of the assets of that fund,

(b)paragraph 2(2)(b) applies and the company has a right under the terms of the policy to receive the whole or any part of any distributions made in respect of the units referred to in that paragraph, or

(c)paragraph 2(2)(a) or paragraph 2(2)(b) applies and the company has a right under the terms of the policy to make periodic cancellations of a proportion of the number of units credited to the policy.

(2) Where this paragraph applies, the value of the linked liabilities calculated in accordance with paragraph 2(1), shall be reduced by an amount calculated in accordance with sub-paragraph (3).

(3) The amount referred to in sub-paragraph (2) is—

(a)where this paragraph applies by virtue of head (a) or (b) of sub-paragraph (1), the value as at the liquidation date, calculated on actuarial principles, of the future income of the company in respect of the units in question arising from the rights referred to in head (a) or (b) of sub-paragraph (1) as the case may be, or

(b)where this paragraph applies by virtue of head (c) of sub-paragraph (1), the value as at the liquidation date, calculated on actuarial principles, of the liabilities of the company in respect of the units which fall to be cancelled in the future under the right referred to in head (c) of sub-paragraph (1).

(4) In calculating any amount in accordance with sub-paragraph (3) there shall be disregarded—

(a)such part of the rights referred to in the relevant head of sub-paragraph (1) which in the opinion of the liquidator constitutes appropriate provision for future expenses and mortality risks, and

(b)such part of those rights (if any) which the High Court considers to constitute appropriate provision for any right or expectation of the policy holder to receive benefits additional to the benefits guaranteed under the terms of the policy.

(5) In determining the amount referred to in sub-paragraph (2)—

(a)interest shall be assumed at such rate or rates as the High Court may direct, and

(b)where relevant, the rates of mortality and the rates of disability to be employed shall be such rates as the Court considers appropriate after taking into account:

(i)relevant published tables of rates of mortality and rates of disability, and

(ii)the rates of mortality and the rates of disability experienced in connection with similar policies issued by the company.

4.  Where the linked liabilities are not expressed in terms of units the value of those liabilities shall be the value (subject to adjustment for any amounts which would have been deducted for taxation) which would have been ascribed to those liabilities had the policy matured on the liquidation date.

5.—(1) The value of any liabilities other than linked liabilities including reserves for future expenses, options and guarantees shall be determined on actuarial principles and appropriate assumptions in regard to all relevant factors including the assumption of such rate or rates of interest, mortality and disability as the High Court may direct.

(2) In valuing liabilities under this paragraph credit shall be taken for those parts of future premiums which do not fall to be applied in the allocation of further units to the policy and for any rights of the company which have been disregarded under paragraph 3(4)(a) in valuing the linked liabilities.

Rule 7(3)

SCHEDULE 4Rules for valuing long-term policies which are not dealt with in Schedules 2 or 3

The value of a long-term policy not covered by Schedule 2 or 3 shall be the value of the benefits due to the policy holder determined on such actuarial principles and assumptions in regard to all relevant factors as the High Court shall determine.

Rule 8(3)

SCHEDULE 5Rules for valuing long-term policies where a stop order has been made

1.  Subject to paragraphs 2 and 3, in valuing a policy Schedules 2, 3 or 4 shall apply according to the class of that policy as if those Schedules were herein repeated but with a view to a fresh valuation of each policy on appropriate assumptions in regard to all relevant factors and subject to the following modifications—

(a)references to the stop order shall be substituted for references to the liquidation date,

(b)in paragraph 4 of Schedule 2 for the words “whereby the policy holder can secure a guaranteed cash payment within the period of 12 months beginning with that date” there shall be substituted the words “to surrender the policy which can be exercised on that date”,

(c)paragraph 6(2) of Schedule 2 shall be deleted, and

(d)paragraph 1(2) of Schedule 3 shall be deleted.

2.—(1) This paragraph applies where the policy holder has a right conferred upon him under the terms of the policy or by the 1979 Order to surrender the policy and that right is exercisable on the date of the stop order.

(2) Where this paragraph applies and the amount required at the date of the stop order to provide for the benefits payable upon surrender of the policy (on the assumption that the policy is surrendered on the date of the stop order) is greater than the value of the policy determined in accordance with paragraph 1 the value of the policy shall, subject to paragraph 3, be the said amount so required.

(3) Where any part of the surrender value is payable after the date of the stop order, sub-paragraph (2) shall apply but the value therein referred to shall be discounted at such a rate of interest as the High Court may direct.

3.—(1) This paragraph applies in the case of a linked policy where—

(a)the terms of the policy include a guarantee that the amount assured will on maturity of the policy be worth a minimum amount calculable in money terms, or

(b)the terms of the policy include a right on the part of the policy holder to surrender the policy and a guarantee that the payment on surrender will be worth a minimum amount calculable in money terms and that right is exercisable on or after the date of the stop order.

(2) Where this paragraph applies the value of the policy shall be the greater of the following two amounts—

(a)the value the policy would have had at the date of the stop order had the policy been a non-linked policy, that is to say, had the linked liabilities provided by the policy not been so provided but the policy had otherwise been on the same terms, and

(b)the value the policy would have had at the date of the stop order had the policy not included any guarantees of payments on maturity or surrender worth a minimum amount calculable in money terms.

Rules 27(2) and (5)

SCHEDULE 6FORMS