Investment Income for AY1 Reserves

ZJiangZJiang
in CCIR.ARinstr

Hi Graham,

I am confused if we should count for the investment income on the AY1 reserves.

In 2015 Spring Q25: calculation of cumulative investment income from unpaid claim reserves A:

  • the 2013AY investment income for CY 2013 is calculated as (0+371896)/2*0.03

In 2016 Spring Q14 b): calculate the cumulative investment income on unpaid claims for AY 2013:

  • We don't count for (0+(2750-1500))/2*0.045

Thanks

Comments

  • grahamgraham
    edited October 2020

    The examiner's report solution to 2016 Spring Q 14 has errors in it. First, in part (b) they mislabeled the years. The investment income they calculated was for 2014 and 2015 (not 2013 and 2014). And I hadn't noticed the error you pointed out above but you're correct. The cumulative investment income for AY 2013 as of Dec 31, 2015 should include

    • (0+(2750-1500))/2*0.045

    The reason they did not include that term is that part (b) is setting you up for part (c). In part (c) they ask for the excess (deficiency) ratio but for that you do not include investment income from the first year. In part (b) the question should have specifically told you to exclude investment income from CY 2013.

  • ZJiangZJiang

    Thank you Graham!

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