2017 Fall #14a - Net Incurred Losses
Hi, can you please explain why the net incurred losses need to subtract the net claim liability from FY 2015 ($47,876)?
When I was doing this question, I just sum the APV of unpaid claim liability for CY 2016 and Net paid claims for CY 2016.
Please let me know 
Comments
Total Incurred Losses = Total Paid + Total Unpaid Losses.
Delta Incurred (Income Statement) = Delta Paid + Delta Unpaid
Delta Paid <==> Paid
Delta Unpaid <==> CY Unpaid - PY Unpaid
Incurred = Paid + Delta Unpaid
Incurred = Paid + CY Unpaid - PY Unpaid
The quantity you have to calculate is the income just for CY 2016. If you don't subtract the previous year-end net claims of 47,876 , you will be including losses that were incurred in prior years (instead of just losses that were incurred in CY 2016.) The APV of 46,074 is a cumulative value at the end of CY 2016 but you need the incremental value for CY 2016.
Another way to think about it is you only include EP and investment income from CY 2016, so you have to make sure you also only include losses incurred in CY 2016.