Fall 2018 Q16 K
Would you be able to explain where the formula for K come's from? I understand that the question is asking for the discounted IBNR at year end for AY 2016 and 2017. My logic was to calculated the discounted ultimate (discounted unpaid + paid) and then take the difference with the case reserves - which isn't provided.
I'm not sure what is meant by AAP liabilities in the solution.
Comments
I provided a detailed solution to this problem in the wiki at the link below because I found the examiner's report a little unclear. See if that clears things up. I think they meant APV not AAP. And the case reserves are given as explained in my solution but in the exam problem it's called UCAE (Unpaid Claims and Adjustment Expense) from Page 60.41 of the annual statement.
https://battleactsmain.ca/wiki6c/CCIR.ARinstr#Alphabet_City
So the runoff exhibit labels the case as ucae?
Yes, but it's very well hidden in the sample annual statement. Here's the upper left corner of the exhibit on page 60.41:
If you notice the little "*" symbol next to the UCAE label and then look at the bottom of the exhibit, you'll see:
Maybe a more common sense way to see this is to observe that on page 60.41, UCAE is on a separate line from IBNR, which would imply they are separate quantities. (The problem is that accounting rules and labels are not always common sense.) Anyway, that's why I really emphasized this exam problem. It was a very difficult problem but it's great for deepening your understanding.
Wow I did not see that, thanks a lot, makes a lot more sense now!