Document ID: chunk:federal_register_of_legislation:F2023L00208:front:0:p3
Version: federal_register_of_legislation:F2023L00208
Segment Type: other
Provision Reference: 
Character Range: 5683–8853

obliged to pay in accordance with the policy documentation and promotional material and the reasonable expectations of policy owners based on the company's current practice; and
       (b)          the minimum termination value.
    10.         The termination value of a policy must be adjusted, if necessary, so that it satisfies the following conditions:
       (a)          for an investment-linked policy, the unit prices used for determining the termination value must be consistent with the fair values of the assets backing the policy;
       (b)          the termination value cannot be less than:
           (i)            the discounted present value of claims incurred prior to the termination date (whether reported or not and taking appropriate account of claims settlement costs); plus
           (ii)         the value of the unexpired risks or, where greater, contractual premium refunds;
       (c)          if the company's obligation to pay a termination value under the policy involves:
           (i)            deferred payments; or
           (ii)         payment by instalments over a period
       the termination value is the present value of those payments; and
       (d)          if the company's obligation under a policy involves payment of an annuity or if the policy is fixed term/rate business or funeral bond business, the termination value cannot be less than the risk-free best estimate liability.
    11.         The discount rate used for the purpose of subparagraphs 10(b) and 10(c) must be the risk-free discount rate. The illiquidity premium must be added to the risk-free discount rate if the illiquidity premium is used in determining the risk-free best estimate liability.

Part B – Minimum termination values

Funeral bond business
    12.         The minimum termination value for funeral bond business is zero.

Risk business (other than long term risk business)
    13.         The minimum termination value for risk business that is not long term risk business is zero.

Unbundled investment business
    14.         The minimum termination value for unbundled investment business is the sum of:
       (a)          the 'starting amount' at the date of commencement;
       (b)          the premium(s) paid subsequent to the date of commencement; and
       (c)          for business other than education bond business, the 'normal investment earnings' credited in relation to the starting amount in (a) and premiums in (b)
    reduced by the sum of:

       (d)          'normal ongoing charges' subsequent to the date of commencement;
       (e)          other charges at the level specified in Attachment 1 - Part II in relation to the premium(s) paid subsequent to the date of commencement;
       (f)           other charges at the fixed dollar level specified in Attachment 1 - Part I; and
       (g)          for business other than education bond business, the normal investment earnings on the normal ongoing charges in (d) and other charges in (e) and (f).
    15.         A contractual increase in regular premiums must be treated as if it was a separate policy.
    16.         For regular premium policies