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Old 07-05-2008, 01:20 PM
tenthring tenthring is offline
Join Date: Aug 2007
Posts: 6,172
Default Module IV - Sheet 9 - End of Year Reserves?

So I just submitted my module IV. I got the sample solution.

On sheet 9 we are modeling the product. Note 2 in the actual model after you input the assumptions states:

Reserve at End of Year equals Reserve per 1000 (Band 1) at end of year multiplied by Amount of insurance In Force at End of Year. Reserve at beginning of year 1 is zero

So my spreadsheet has (reserve at end of year) * (cumulative persistence) * (insurance sold). So for instance 1,000,000 or insurance was sold and 0.961026 of that was left at the end of the year. So that would constitute the Amount of Insurance In Force at End of Year. Why then does the sample solution use insurance in force at the beginning of the year in the calculation, rather then end of year?
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Old 07-07-2008, 11:12 AM
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DAG FIN DAG FIN is offline
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I noticed that too. I think it's to reflect the assumption is that all terminations occur at the end of the year. I thought it was more appropriate to base the reserve after terminations, so I calculated the reserve in the same way you did. It doesn't make a material difference in the solution, but it is a bit confusing. I guess it depends on the definition of the "end of the year"...
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