This paper reviews the present statutory valuation method and regime. It discusses the usefulness and effectiveness of the method in relation to the current range of insurance contracts. It suggests a possible alternative approach to statutory valuation which could enable offices to demonstrate both their solvency and their ability to meet policyholders' reasonable expectations. It reviews the effects of introducing the suggested method and its relationship with other current reporting issues.

The burden of legislation upon authorized insurers in the U.K. continues to grow and this is particularly true for the statutory valuation. In recent years regulations have been introduced to cover such matters as the valuation rates of interest, the provision for changes in investment conditions and the setting up of solvency margins.The purpose of this paper is to summarize some of the more important aspects of the Regulations and comment upon their interpretation with reference to current practice. A substantial part of the paper is concerned with the provision for changes in investment conditions. Some implications for financial control and product pricing are also mentioned.The paper will concentrate on the valuation of liabilities and is written in the context of assets taken in accordance with the asset valuation regulations, that is to say broadly at market value. Most of the paper is addressed to conventional business but a few comments on linked business are included. The material is discussed under various headings but is so interdependent that it is difficult to concentrate on one aspect without impinging on several others.