DPAE and PDR in the one equation

oxalisoxalis
in CIA.PrLiabs

Hi,

Can you please confirm this formula is correct? DPAE = UEP + Unearned Commission - Premium liability +PDR

Thank you!

Comments

  • suomisuomi

    If you have a PDR, then your DPAE is 0 and vise versa.

    You might be referring to Premium Liabilities where DPAE/PDR is a component.

  • AnLaPeAnLaPe

    This formula works, when there is a premium deficiency, the terms cancel out and the formula equals 0, and when there is not it gives the equity in the unearned premium reserve.

    It just seems like a more complex way of writing

    • max DPAE = max(0, UEP + Unearned Commissions - Premium liability)

    Since you need to first calculate the PDR.

    Also I'd be careful about using DPAE in the exam, this is the formula for max DPAE, actual DPAEs could be lower.

  • suomisuomi
    edited April 2022

    I see so when we are calculating for DPAE, we are actually calculating the Max DPAE. The actual DPAE is some random number the accountants book right? and that number can't exceed the Max DPAE that the actuaries calculate?

  • AnLaPeAnLaPe

    Yes, exactly!

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