MCT-Net claim/premium liability- 2017 Fall #20

cgc2018

Hello, Graham;

At your practice question, you always use the term net claim/premium liability( discounted and exclude PfAD), but 2017 Fall#20, they did not say anything, but also given the value of PfAD. I thought we need to add it when calculate the interest rate margin.

Should we assume net claim/premium liability include PfAD if the question did not specify it?

Thank you

graham

Thank you for highlighting this. You're right that if they just say "net", you should assume that PfAD's are included, which means you have to subtract PfADs. Another example of this is:

• https://www.battleactsmain.ca/pdf/Exam_(2015_2-Fall)/(2015_2-Fall)_(18).pdf

To get the right answer for capital required for claim liabilities, you first have to subtract PfADs from the values they provide for "net claim liabilities".

In the practice template I created, I was trying to make it clear that the calculation has to be done without PfADs.

chrisboersma

The exam likes to copy the language from the source material as close as possible. Here it is clear that the risk is referring to APV. So Net Claims Liabilities = Gross APV - Ceded APV

4.2.1. Margin for unpaid claims

The margin for unpaid claims is calculated by line of business, by multiplying the net amount at risk (i.e. net of reinsurance, salvage and subrogation, and self-insured retentions) less the provision for adverse deviation (PfAD), by the applicable risk factors.

cgc2018

Thank you Chris!