Sick leave rules and definitions
The basic rules for defining work stoppage, with the distinction between incapacity and invalidity, are those of the French Social Security system. These two notions are linked, since a work stoppage linked to incapacity can become definitive. There is a positive probability that an incapacitated individual will become disabled. This is known as pending disability.
Loi Evin
The Evin law n°89-1009 of December 31, 1989 gives the following definition: "Provident insurance covers operations aimed at preventing and covering the risk of death, risks affecting the physical integrity of the person or linked to maternity, risks of incapacity for work or disability, or the risk of unemployment". Provident schemes are therefore designed to protect employees from the consequences of life's hazards. This law requires provident institutions, mutual insurance companies governed by the French Mutual Insurance Code (Code de la Mutualité), and companies governed by the French Insurance Code (Code des Assurances) to set aside provisions for outstanding claims to cover various risks.
Insurers must set aside various reserves to cover the entire risk. Mathematical reserves are the compulsory reserves that insurance companies are required to set aside, and which must remain available at all times to guarantee the payment of benefits. This means that, should the need arise, they can immediately release funds to their policyholders. Mathematical reserves therefore represent the insurer's probable debt to its policyholders. The decree of March 28, 1996 sets out the rules for funding disability and incapacity benefits.
The death guarantee reserve is the reserve that insurers must cover against the risk of death of disabled or incapacitated policyholders (Loi Evin). The decree of July 7, 2001 obliges insurers to cover and provision for the risk of death in the event of incapacity or disability.
In the accounts that insurers must produce, there are also provisions for claims to be paid, which are provisions made for claims that have already occurred and are known about, but for which payment has not yet been made (e.g. because documents are missing), and provisions for unknown claims, which correspond to claims that have already occurred but of which the insurer is not yet aware (e.g. a claim that occurred at the end of December for accounts closed on December 31). In this case, the reserve is estimated statistically by actuaries.
Mathematical provisions
For the valuation of inventory mathematical provisions (MP), the decree of March 28, 1996 defines four obligations: the provisioning of disability in the form of a current disability provision and another pending disability provision; the provisioning of current disability; the use of BCAC regulatory maintenance tables or a certified table, and the use of a rate lower than 75% of the TME (average rate of French government bonds), increased by 4.5%.
The TME is the arithmetical average of the month's TEC 10 plus 0.05%. The CNO-TEC n daily index (Constant Maturity Rate for years, for between 1 and 30) is the actuarial rate of a fictitious Treasury security whose life would be equal to n years at each point in time (i.e. 10 years in the case of TEC 10). This rate is obtained by linear interpolation between the annual actuarial rates of return of the 2 French government securities closest to maturity n. TEC 10 is the rate for the constant 10-year maturity. It is one of the main benchmarks on the bond market. The TEC 10 is calculated by the Comité de Normalisation Obligatoire, and published every business day by Agence France Trésor. This rate is obtained by linear interpolation between the annual actuarial yields of the two Treasury securities that most closely match the theoretical 10-year maturity.
In addition, actuaries use mortality tables in the event of incapacity and/or disability to model the probability of remaining on the job. The tables are used to calculate the probability of remaining on the job, or the probability of moving into a given state. Age and seniority in the state are the components of these tables, and BCAC has published a version of each of these tables, in compliance with the Evin law (cf. decree of 03/28/1996). Initially built in 1993, these tables were modified by the decree of December 24, 2010 setting the funding rules for disability, invalidity and death benefits, published in the Journal Officiel of December 30, 2010, and then completely rebuilt in 2013.