2017 SpQ15 - EQUP mislabeled

chrisboersmachrisboersma
edited April 2019 in CIA.PrLiabs

I noticed in the above question that the problems doesn't use the follow expression (between steps 7 and 8)

Max.DPAE = max(EQUP, 0)

This question makes this material more complicated by mislabeling row (7) = (1)-(5)-(6) as EQUP.
EQUP = (1)-(5)-(6) + Unearned Commissions.

The solutions incorrectly suggests that:

Max DPAE = MAX( EQUP+Unearned Commision,0)

It might be worth adding a note to the Premium Liability section pointing this out. It also introduces a concept that is completely unnecessary and not part of the exam materials (I could find): Adjusted Unearned Premium (worth explaining).

Comments

  • chrisboersmachrisboersma

  • javidjavid

    @chrisboersma, I think even in the source material it isn't as clear. On page 5 of https://www.cia-ica.ca/docs/default-source/2014/214114e.pdf, we have:

    Equity in the net UPR: amount by which the net UPR plus unearned (reinsurance) commissions exceeds the net policy liabilities in connection with unearned premium, also referred to as the maximum deferrable policy acquisition expenses.

    Yet in that same document, on page 16 (Appendix C Sheet 1), Unearned Reinsurance Commissions is a separate item from EQUP.

    As for the "Adjusted Unearned Premium", it isn't defined explicitly but is included in each of the Appendices (Sheet 3 - pages 15, 18, 21).

    So in answering this question, the CAS seemed to have followed the format in the Appendix

  • chrisboersmachrisboersma
    edited April 2019

    Thank-you that helps

    Adjusted Unearned Premium - yes, but would be useful to add to the BattleAct pages (and potentially BattleCards) - because it simplifies the problems (concept) substantially and is no longer part of the new materials.

    The Nov 2014 version was replaced in July 2016 appears as though this question is from the older material. How confusing!

    Exhibits are now in a Excel file. No reference to "adjusted unearned premium" in the new file.

    Strange how the text doesn't match the appendix - one of them needs to be correct. Thankfully, the newer materials don't include this inconsistency.

    https://www.cia-ica.ca/docs/default-source/2016/216076e.pdf

  • javidjavid

    Yes, thanks for linking to the more recent one which does not include this discrepancy.

    I'll forward your suggestion to @graham

  • grahamgraham

    Thanks Chris for noticing this. I have:

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