Loss Ratio (Discounted vs. Undiscounted)

jc2018jc2018
in CCIR.ARinstr

Hi Graham,

I'm going over Spring 2015 Q25 and I have a question about the undiscounted LR.
On page VI-9 of CCIR Instructions, it says that
incurred claims = Amounts paid during year - Investment income from UCAE and IBNR for the AY + Unpaid claims for that AY.

In the examiner's report, for discounted LR, we do as the above formula and subtract the [cumulative investment income from unpaid claim reserves] previously calculated, but we don't do this for the undiscounted LR.

I am having trouble understanding why we don't subtract the investment income from UCAE and IBNR for the AY from undiscounted LR.

Thanks,

Comments

  • chrisboersmachrisboersma

    undiscounted is equivalent to no adjustments for present value or interest
    discounted is equivalent to adjustments for (actuarial) present value and interest

    Claims
    discounted = Incurred = APV + Paid - Interest
    undiscounted = Undiscounted.Paid + Undiscounted.Unpaid

    Earning
    discounted: PV.unearn + Interest(unearn) + earned (Accident Year premium + interest)
    undiscounted: unearn + earned (Accident Year premium)

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