CO129-346 - Governor Sir Lugard - 1908 [1-3] — Page 213

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The Managing Director,

210

Shanghai, 2nd.December,1907,

The China Mutual Life Insurance Company, Limited,

Dear Sir,

Shanghai.

Re Hongkong Government Ordinance.

As requested by you, I have examined the

Ordinance relating to life insurance companies which has now

become law in Hongkong. I would first like to discuss Section

24, printed on page 897.

This Section provides that the Company may

be wound up on the application of any policy holder, if it can

be proved that the Company is insolvent, the liabilities being

ascertained by a net premium valuation of 4 per cent, based

upon the Combined Experience and "Actuaries" Rate of Mortality

(called Rate of Mortality in the text).

To make a valuation for solvency, we must

strike a balance between the Liabilities and Assets of a

Company. The Liabilities of the company consist in promises to

pay certain sums in the future. The assets of the company con-

-sist of sums already in hand and premiums to be received from

the assured.

The company is solvent if the suns already

in hand accumulated at interest together with the preniums to be

received, also accumulated at interest, will pay expenses and

meet the claims as they become payable. There are then three

things to be ascertained before one can proceed with the

valuation (1) the rate of interest. (2) the provision for

expenses. (3) the provision for claims.

(1)

The rate of interest to employ is evidantly

that at which the company can keep its funds invested, this

being the rate at which present assets and future premiums will

be accumulated to meet maturing claims. In asceresetaining this

we

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