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  #1  
Old 02-20-2012, 09:38 AM
sophie sophie is offline
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Default Disabled Life Reserves

hi,

can anyone tell me the formula how to compute disabled life reserves? i saw a thread related to it, but i guess the one who posted it is one step ahead of me. i have zero knowledge on this so it would be helpful if someone would teach me how to work this out.

i'm actually trying to replicate the reserve computation (per seriatim) generated from our actuarial software. i am given the following policy information:
- issue age
- disability date
- issue date (same as disability date)
- monthly benefit
- benefit start date
- benefit termination date

i can also view the disability tables and interest rates used in reserving. however, i cannot figure out how they computed the reserve amount as of the valuation date.

can someone help me out, pretty please???

many, many thanks!!!
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  #2  
Old 02-20-2012, 09:53 AM
MNiemerg MNiemerg is offline
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Are you referring to a rider to a life product or what exactly?


I'm new so I don't know how to use mathematical notation...

A DLR is essentially an annuity. You want the actuarial PV of payments while the claimaint is disabled.

From: Disabilty Date + Elimination Period
To: Benefit Termination Date
What: Sum ( Benefit*Survival*Interest Discount)

Where:
Survival = tpx = the probability of not terminating before payment
Interest Discount = (1/(1+i)^t
t = months between cash flow and valuation date

Last edited by MNiemerg; 02-20-2012 at 10:22 AM..
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  #3  
Old 02-20-2012, 11:38 AM
CuriousGeorge CuriousGeorge is offline
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Have you looked at the documentation? PolySystems, at least, gives very detailed formulas for how it calculates its reserves.
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  #4  
Old 02-20-2012, 11:53 AM
sophie sophie is offline
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i've searched the help topics already. unfortunately, it doesn't provide any details about the calculation.
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  #5  
Old 02-20-2012, 11:55 AM
sophie sophie is offline
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Quote:
Originally Posted by MNiemerg View Post
Are you referring to a rider to a life product or what exactly?


I'm new so I don't know how to use mathematical notation...

A DLR is essentially an annuity. You want the actuarial PV of payments while the claimaint is disabled.

From: Disabilty Date + Elimination Period
To: Benefit Termination Date
What: Sum ( Benefit*Survival*Interest Discount)

Where:
Survival = tpx = the probability of not terminating before payment
Interest Discount = (1/(1+i)^t
t = months between cash flow and valuation date
thank you very much for this! will use this formula to replicate the reserve computation. hopefully this one is the same as used in the software.
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  #6  
Old 02-20-2012, 02:29 PM
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Old Timer Old Timer is offline
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Keep in mind that the benefit payments may not be level over time, they may decrease at 60 or 65 or 70 for example.
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Old 02-20-2012, 04:40 PM
CuriousGeorge CuriousGeorge is offline
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Quote:
Originally Posted by sophie View Post
i've searched the help topics already. unfortunately, it doesn't provide any details about the calculation.
You didn't say which vendor, but they may have a computations manual that doesn't link up to the help menus. If the help topics don't give the detail you need, I would contact the vendor and see if other documentation exists that you aren't aware of.
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Old 02-21-2012, 01:32 AM
sophie sophie is offline
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Quote:
Originally Posted by CuriousGeorge View Post
You didn't say which vendor, but they may have a computations manual that doesn't link up to the help menus. If the help topics don't give the detail you need, I would contact the vendor and see if other documentation exists that you aren't aware of.
we're using AXIS to compute the reserves.
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Old 02-21-2012, 10:55 AM
RichieGB RichieGB is offline
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There may be some differences based on what type of assumptions they make in the calculation (e.g. are payments distributed at beginning, or middle of month?) My experience with another vendor was that the assumptions didn't always make sense, and their figures were damn near impossible to replicate without additional assistance.

So my suggestion would still be to contact AXIS and ask for some guidance if you get the basic calculation down and find that it doesn't match.
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Old 02-21-2012, 12:58 PM
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asdfasdf asdfasdf is offline
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Quote:
Originally Posted by sophie View Post
hi,

can anyone tell me the formula how to compute disabled life reserves? i saw a thread related to it, but i guess the one who posted it is one step ahead of me. i have zero knowledge on this so it would be helpful if someone would teach me how to work this out.

i'm actually trying to replicate the reserve computation (per seriatim) generated from our actuarial software. i am given the following policy information:
- issue age
- disability date
- issue date (same as disability date)
- monthly benefit
- benefit start date
- benefit termination date

i can also view the disability tables and interest rates used in reserving. however, i cannot figure out how they computed the reserve amount as of the valuation date.

can someone help me out, pretty please???

many, many thanks!!!
You'll need to know the probability of the disabled life dying, and of returning to healthy status, with those just calculate like a regular annuity value.
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