Fall 2017 Question 15

jyjk0519jyjk0519
in CIA.PrLiabs

Hello,

To calculate the Net PV of Prem Liab, we use [(Net UEP - Reins cost) x LR + ULAE] x PVFctr. In this situation we are given the Gross PV so it is easy to calculate the PfADre, however if we werent given that number we would have to directly calculate it ourselves. In that situation in the above formula, we would set Reins Cost to 0 but would we still use Net UEP or would we use Gross UEP?

Thank you,

Comments

  • jyjk0519jyjk0519

    Also in the question it calculates the premium deficiency to be 4687 but what does it mean why the last row?

    Note that there is no premium deficiency or DPAE for facility given that net unearned premium =
    premium liabilities

  • grahamgraham

    First question: Use gross UEP. See the "Special BattleActs Tip" here:

    Second question: The statement about facility is just to make the answer complete. I'm not sure if the graders would deduct points if you didn't include this statement, but I think they are just stating that any business dealings with Facility Association would not affect DPAE/PDR because FA operates as a non-profit and either levies a charge to insurers if premiums don't cover losses, or they return money to insurers if losses exceed premiums.

  • tracy95tracy95

    Hi!
    In this question, I know the question gives the Gross PV which is 53k. But can we calculate gross PV by ((gross unearned premium)ELR +ULAE)PV factor since the question also gives us gross unearned premium. The calculated gross PV is around 59K which is quite different from the 53K. Is there any problem to use the calculated gross PV instead of 53k given by the question?

  • Staff-T1Staff-T1
    edited April 2022

    Yup but you are given the Net Loss Ratio rather than the Gross Loss Ratio so it's impossible to calculate from scratch

  • ThrowGrowThrowGrow

    Hi, I read the comments above and still have trouble understanding the statement at the end of the solution.
    Note that there is no premium deficiency or DPAE for facility given that net unearned premium = premium liabilities

    In this question, Net UPR = 55000, Prem liability = 61987. They don't match. Does it mean the above statement doesn't apply here?

  • Staff-T1Staff-T1

    Uhhhh yeah I would just ignore that last statement. That statement doesn't make sense to me too

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