Prudential rules refined for life insurers

Life insurers will be permitted to create non-attributable expense provisions for non-profit business at a homogeneous risk group level rather than at individual contract level the FSA has confirmed in PS06/14. The rule will also apply to all long-term insurance business, such as unitised with profits policies, to give consistency in expense reserving. Where service companies are used and charge on a per policy rate, expenses will need to be treated as attributable to individual policies. When charges are by fund the firm will have to decide how this assignment calculation will operate in line with its agreement with the service company.