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Old 04-26-2019, 02:34 PM
SweepingRocks SweepingRocks is offline
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Default Full Preliminary Term Reserve Question

So I was going through some Coaching Actuaries Long Answer sample problems. Got to one about reserves and got all parts right except for one about FPT reserves.

The problem previously established that there were expenses associated with the insurance. However, when calculating the modified renewal premiums for FPT, the solution CA had did not take into account expenses and instead found the modified net premium and used that to calculate FPT reserves.

I know that FPT works by modifying the first premium to cover deaths in the first year and establish a reserve of 0 at end of year 1. I'm a bit confused why in this problem, expenses weren't taken into account.

I'll attach some pictures detailing the relevant parts of the questions. My issue is with part d in finding FPT reserve at end of year 2. As you can see, they found net premium instead of gross. Is it common practice to ignore expenses in this case?

Thank you in advance!

Images: https://imgur.com/a/J3p6hKP
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