Loading…
CMFASPrepStudyingRES5
Switch exam
Financial advisory
RES5Financial Advisory Services✓In a given year an insurer allocates S$108 million to its participating policy owners as bonus. Under the 90:10 rule, what is the maximum profit the insurer may take from the participating fund for that year?
The 90:10 rule caps the insurer's share at one-ninth of the amount allocated to policy owners as bonus: 1/9 x S$108 million = S$12 million. Equivalently, the S$108 million is the owners' 90% share, so total distributable surplus is S$120 million and the insurer's 10% is S$12 million.
Taking 10% of the S$108 million bonus (S$10.8 million) is wrong - the S$108 million is already the owners' 90% share, so the insurer's cap is one-ninth of it (S$12 million), not one-tenth. S$120 million is the total distributable surplus, not the insurer's profit.
Practise more M9 Participating Policies & ILPs questions
Exam-style questions with worked answers, then full timed mocks. Free to start.
Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.
Start practising →Original study material mapped to the public CMFAS M9 syllabus. Unofficial, not endorsed by MAS or SCI. Verify figures and rules against current guidance before relying on them.