dividend, pay the owners a dividend compensating for “shortfalls” in earlier, weaker, financial years.

The measurement principle used for assets is crucial for the determination of the realized result. The use of fair values means that all value changes on assets are reflected in the realized result and must be divided between policyholders and owners. There are no hidden values serving to cushion the volatility of financial markets in the accounts and in the realized results.

The second element is the "distributed contribution principle" according to which policy holders are entitled to a share of the income generated that corresponds to the premiums they have paid and the accumulated interest and bonuses that have been added to the premiums in the course of the contracts. But policy holders have different contracts with different terms. The amounts allocated to individual policyholders do not necessarily correspond exactly to the amounts relating to individual contracts, but reflect the different risks associated with specific types of contracts. In relation to the distributed contribution principle, the executive order implies that "redistribution of significant financial amounts shall not take place between insurance contracts, beyond the amounts following from the coverage of risks included in the insurance contracts".

The companies have discretion regarding the timing of the allocation to individual contracts. They can retain the bonuses to a certain extent for prudential reasons, but this prudential consideration should be balanced toward the principle that bonuses should be released to individual policy holders in the course of the contract in a way that ensures a fair distribution between policy holders with different characteristics.

The allocation of bonuses to policyholders follows the rules set for the creation of technical provisions. When the provisions for guaranteed benefits, bonus potential for future premiums, and bonus potential for paid premiums have been set, any remaining allocation to policyholders is posted on the collective bonus potential.

When results in a particular year are negative, the deficit that is attributed to policyholders is covered in reverse order. If the negative results cannot be covered by deductions from these provisions or from the company's own funds and special bonus provisions, the responsible actuary must immediately notify the DFSA.

# **9. Disclosure Rules**

To enhance transparency and facilitate more informed decisions, pension institutions are required to disclose in their annual accounts key figures and ratios regarding investment returns, costs, risks and capital strength. In addition, the DFSA publishes on its website key performance indicators of individual institutions as well as of the two sub-sectors of life insurance companies and multi-employer pension funds.

# **10. Off-Site Analysis and On-Site Inspections**

The DFSA conducts regular off-site examinations of the financial data submitted by regulated institutions and reviews the results of their operations. Pension institutions must provide the DFSA all necessary information for the performance of its duties. Nearly all financial information is made available in electronic form. The DFSA is entitled to gain access to the premises of pension institutions at any time without warrant in order to 16