Rein Methods - Coinsurance

[Genki]

On the Tiller book, page 135, should the surplus for the reinsurer be -100? It is confusing to see the beginning balance of the surplus account at the beginning of year 2 of -100 (page 140), but yet the surplus was 0 on page 135.

Also, on page 136, in the middle of the page, it says the beginning balance in the account is $100, but the the line right below lists the beginning balance of $0. Is this confusing to anyone else?

Also, on page 143, the reinsurer has $100 under investment income for Reserves. This summed with 0 then gives a total of 0. It seems like the investment income should be 0. Does anyone else agree?

[happynsweet]

For coinsurance (example on p135), there shouldn't be any surplus to the reinsurer in year 1 - they are getting 100% of the invested assets and are assuming 100% of the reserves in this example which nets to 0 surplus.

P 136 - yes, you're right. I think this is a typo to say beginning of balance $100. The beginning balance should be 0.

P 140, beginning balance in year 2 is -100 because that was the end of year balance in the surplus account for year 1. You should notice when doing all O/S surplus accounts that the year 2 beginning value = year 1 ending value

P 143 - you are right - inv income for reserves is 0. It's year 1, there was no way investment income could have been earned yet plus under mod-co, the assets are trf to the reinsurer so they can't earn investment income on the assets backing the reserves.

hope this helps!