This is closely related to the unit reserve. The value of the European Currency Unit as used when calculating the statutory minimum solvency margin. The unit of account is the ECU with a minimum of 41.66 pence. This is the process whereby the price of units is set. The price of units is basically a reflection of the value of the underlying assets.
Capital gains tax liability further complicates the issue.
This is part of the reserve that a life insurance company needs to set up in respect of its unit-linked contracts. The unit reserve represents its liability in terms of units under the contracts. It may be calculated by taking a special unrounded unit price with no allowance for transaction costs, and by multiplying this number by the number of units promised to policyholders. There may also be a further adjustment for actuarial funding. The unit reserve is then fed into the cashflow model to calculate the sterling reserve, which ensures that in aggregate the unit and sterling reserves are enough to eliminate future negative cashflows on the policy.