A couple more changes for the Study Manuals:
Gorvett:
-Sample Q3: In the question, change “AM Best” to “S&P”
IRIS:
-in the example for Ratio 4, replace the 1,250 with 1,200
-IRIS11/ 12: delete the last paragraph, as this no longer appears in the syllabus readings.
Notes:
-I commented on the treatment of the non admitted charge from Large Deductible policies in a prior blog, but wanted to elaborate. In the paper, Feldblum stated that the nonadmitted charge only applies to losses paid by the insurer. However, a past exam question applies to both paid and unpaid. If you choose to apply it to both paid and unpaid, again I’d recommend stating the assumption that I mentioned in the earlier blog. If you choose the former approach (only applying to paid), I would still recommend stating in your solution the assumption that the non admitted charge only gets applied to the paid losses.
-Because of the ambiguity, I recommend changing the example on pg10 to add that the $200 of losses has already been paid by the insurer. This will change the answer of part a to say that a reserve of 800 is established, and the insurer would create a recoverable of 150. Similarly, in part b, the reserve is 800 and the recoverables are 194. In part c, the reserve again is 800.
Schedule P:
-2004, Q62: my video explanation is not correct. I should have compared case reserves as of the same ages. For eg, the 2003 AY reserves as of 12 months should be compared to the 2002 AY reserves as of 12 months, and so on.
That’s it for the errata for the time being.
SEMINAR FOLLOWUP:
There were a few questions outstanding from the Live Seminar. Here are my responses. I think this covers everything (please send me an email if I am leaving anything out).
Q. When deriving the right most column in Schedule P, Part 2 using Part 1 data, do we need to adjust for the tabular discounts?
A. Yes, since Part 2 is gross of tabular, but Part 1 is net, we would need to add in the tabular discounts back to the reserves. The footnote from Schedule P, Part 1 actually mentions “The tabular discount, if any, is reported in the Notes to the Financial Statements which will reconcile Part 1 with Parts 2 and 4″.
Q. Does “investment income due and accrued” directly enter into the investment income calc?
A. Not directly (refer to the Investment Income calculation in the Annual Statement”). The investment income due figures are already included as Investment Income amounts in the Income Statement. For example, if the company has $100 of bond investment income due and accrued, this $100 would be includes in the Investment Income from bonds in the Income Statement.
Q. Does Schedule F include both prorata and excess reinsurers?
A. Yes, the Schedule includes all reinsurers. Since the insurer is recording the reserves net of all reinsurance recoverable, it is important to establish the provision to account for the potential uncollectible recoverables from all sources.
Angelo Uncategorized