LAM15340 | Excess expenses, losses and deficits: Loss reform: shock losses: quantifying the shock loss when the shock loss period is not an accounting period CTA10/S269ZK

If there is not an accounting period which aligns with the solvency shock period then the loss arising in an accounting period needs to be apportioned to find the shock loss for that portion of the accounting period which is part of the shock loss period. The apportionment fraction used is:

P/N

Where

• P is the number of days in the accounting period which fall within the solvency shock period; and

• N is the number of days in the accounting period

Where apportionment on this basis would not be just and reasonable the loss in the accounting period can be apportioned on a just and reasonable basis. The just and reasonable apportionment may be important where a significant loss is spread unequally over accounting periods. In these cases, evidence of which accounting periods the actual loss arises can be used to determine a just and reasonable apportionment.

It is possible that there may be more than one accounting period, where there is a loss, falling within the solvency shock period. In that case the shock loss will be the sum of the apportioned losses of all the accounting periods falling within the 12-month solvency shock period.