Premium Liabilities Duration
How do we account for the avg accident date adjustment in the duration calculations? Since the past exams are outdated, I think it would really help if I could see a detailed calculation of premium liability duration with the new method
Comments
Have you gone through?
http://www.cia-ica.ca/docs/default-source/2017/217027te.xlsx?sfvrsn=0
App A Sh4
This is likely how the CAS would want to form the exam questions. They calculate both effective and modified durations.
modified = (Macaulay - 1/6) / (1+ r)
effective = calculate 3 present value [@i,i+delta(i), i-delta(i)] calculations using the 1/6 adjustment: x (1+r)^(1/6)
Also, in that worksheet you can replace the 0.5 in Cell C10 with 0.3333 (or the (9) Mean Accident Date of UPR) and the adjustment factor will disappear: 1/3 - 1/3 = 0 (instead of 1/2 - 1/3 = 1/6). We move the calculation from an adjustment to directly calculating the present value (which in my opinion is easier then remembering how to do the adjustment).
Why do we assume that payment are made at mid-year and then go through adjustements because we know they are not made at mid-year ?
Why not assume payments are made at every 1/3 of year and just skip the flippidyfloppidity recalculation.
Is it because is so much faster to type it in the calculator ? Or is it simply so thta both premium and claim calculations look similar ?
Sorry I should have mentioned that I'm referring to a question in particular.
2016 Fall Q15a - the battle card answer provides a final answer of the new method for premium duration but there are no calculations shown
Please see: https://www.battleactsmain.ca/wiki6c/2016.Fall_Q15_Redone (for more context, please see the '2016.Fall #15 Redone' section under https://www.battleactsmain.ca/wiki6c/CIA.PrLiabs#Duration_of_Premium_Liabilities)