ACE (Seminar book) Page 76

[stillH2O]

Can someone who attended the seminar explain the solution? ( I don't know if I can replicate the question here without copyright issues from Jacob/ben)

The question is related to direct (accural) premiums and cash (collected) premium.

In our study note, accural premium= direct premium+net premium from rein
If rein prem paid is 15, and reinsurance exp allowance is 5, shouldn't it be net of 10? The answer only deduct 15 out, but I thought it should deduct 10?

Any advise will be appreciated! Thanks

[appleapple]

I thought the EA was extraneous information. It certainly is not used any where in the solution. Whether or not it should have been used I cannot answer.

[stillH2O]

Originally Posted by appleapple

I thought the EA was extraneous information. It certainly is not used any where in the solution. Whether or not it should have been used I cannot answer.

Yes, it wasn't used in their solution but i am not sure if their solution is right. I have found various mistakes with their solutions to other problems....

[ACEManual]

I think, as was noted throughout the seminar, as well as when we discussed this problem, it's a classic case of "state your assumption". I don't believe the book explicitely states how to deal with EAs, rather it talks about taking into account reinsurance premiums paid and recieved. Now are those net of EAs or not? Well, in the example we're not including them, but I think either method would earn you same amount of points on exam day. Be sure to state your assumption and write down the formula detailed in the book. Feel free to contact acestudyguide@yahoo.com with further questions.

[stillH2O]

Originally Posted by ACEManual

I think, as was noted throughout the seminar, as well as when we discussed this problem, it's a classic case of "state your assumption". I don't believe the book explicitely states how to deal with EAs, rather it talks about taking into account reinsurance premiums paid and recieved. Now are those net of EAs or not? Well, in the example we're not including them, but I think either method would earn you same amount of points on exam day. Be sure to state your assumption and write down the formula detailed in the book. Feel free to contact acestudyguide@yahoo.com with further questions.

Thanks for your clarification!