CIA.Frei.RskTrans Pitfall of Risk Transfer Test

thesuperactuarythesuperactuary
in BK.Reins

I can't seem to create a threads on CIA. Frei Risk category. so i put it here. since it falls under "Reinsurance"

"Premiums:
- use PV (Present Value) of GROSS premiums
- apply premium adjustments to UNDISCOUNTED premiums"

--> could someone please elaborate a little bit? It seems a bit contradicting - Using PV on gross premium and premium adjustment to undiscounted premiums

Comments

  • Staff-T1Staff-T1

    Which section of the wiki are you referring to?

  • thesuperactuarythesuperactuary

    The Battlecard: Pitfalls in a Risk Transfer Test (6) - Premiums part

  • Staff-T1Staff-T1
    edited August 2022

    Okay I see it - I think for the first point it is pretty self-explanatory due to payment plans and the fact that premiums are not all paid at once.
    The second point is referring to the modelling of a risk transfer. What it is saying is that any loss ratio caps or premium adjustments should be done BEFORE discounting premiums.
    As an example, the LR cap should be calculated as a % of undiscounted premiums not discounted premiums

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