3.3 Comparing Providers
3.3.1 Financial Strength
-
The Free Asset Ratio (FAR) shows the proportion of total assets
in excess of requirements to support existing policy liabilities
(hence, 'free asset').
-
It therefore reveals the ability of the provider of with profits
business to maintain bonus levels and to support existing business
plans or to expand into other areas.
-
FAR figures are generally taken from the regular returns made by
the life offices to the DTI, as required by the Insurance Companies
Act 1982 and the Insurance Companies (Accounts and Statements) Regulations
1983.
-
The FAR should not be used as the only guide to a provider's financial
strength, as it will not reflect current and projected business,
nor management effectiveness and other guides.
|