CFO Forum Market Consistent Embedded Value Principles

Market Consistent Embedded Value Principles April 2016 . CFO Forum Market Consistent Embedded Value Principles April 2016 . Market Consistent Embedded Value Principles October 2009. Contents Introduction . 2. Coverage . 2. MCEV Definitions .. 3. Free Surplus 3. Required Capital 3. Value of in-force Covered Business 4. Financial Options and Guarantees 4. Frictional Costs of Required Capital 5. Cost of Residual Non Hedgeable Risks 5. New Business and Renewals .. 7. Assessment of Appropriate Non Economic Projection Assumptions 9. Demographic Assumptions 9. Expenses 9. Taxation and Legislation 10. Economic Assumptions 11. Inflation 11. Smoothing 11. Investment Returns and Discount Rates 11. Reference Rates 12. Stochastic Models 12. Participating Business 13. Disclosure 14. Glossary ..15. Abbreviations .. 20. Appendix A Examples of possible disclosures .. 21. Assumptions 21. Methodology 21. Analysis of MCEV earnings; Reconciliation of opening and closing values 23.

Page 5 of 30 Market Consistent Embedded Value Principles – April 2016 G7.2 Where management discretion exists, has passed through an appropriate approval process and would be applied in ways that impact the time value of financial options and guarantees, the impact of such management discretion may be anticipated in the allowance for financial options and

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