Standards for Valuation of Pre-Need Plan Reserves

Valuation methods must be consistent with permitted accounting adjustments for deferred expenses.
The net level contribution method of prospective valuation is mandated for both pre-need benefits and insurance premium reserves when expenses are deferred.
Only first year commissions, overrides, and bonuses may be deferred; administrative and other marketing expenses are ineligible.
Expense deferment periods cannot exceed the installment payment period and must comply with the SEC's Rules on Registration and Sale of Pre-Need Plans effective 21 September 2001.

For contracts with installment payment defaults but eligible for reinstatement, the reserve liability cannot be less than the existing reserve minus uncollected contributions up to valuation date, multiplied by a reinstatement factor determined by the actuary.
Uncollected contributions must not be accounted as assets.

The interest rate assumption must reflect expenses and taxes on investments and not exceed 80% of the average interest rate of the longest-term Philippine government securities traded in the preceding three months.
If the trust fund's experienced net yield surpasses this maximum, the actuary must provide conclusive proof of the net yield's attainability for the remaining contract periods before using this rate.

Surrender, cancellation, utilization, and inflation rates must be based on the company's actual experience over the past 3 years or, if unavailable, the industry experience.
For fully paid plans, no decrements other than utilization rates for contingent principal benefits may be applied, unless justified and approved by the SEC upon submission by the actuary.

The actuary must annually validate all actuarial assumptions used in reserve valuation.
The actuarial certification submitted to the SEC must include a statement describing this validation procedure.