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#1
02-20-2012, 09:38 AM
 sophie Member Join Date: Oct 2006 Posts: 87
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!!!
#2
02-20-2012, 09:53 AM
 MNiemerg SOA Join Date: Feb 2012 Posts: 2

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..
#3
02-20-2012, 11:38 AM
 CuriousGeorge Member CAS SOA Join Date: Dec 2005 Posts: 1,552

Have you looked at the documentation? PolySystems, at least, gives very detailed formulas for how it calculates its reserves.
#4
02-20-2012, 11:53 AM
 sophie Member Join Date: Oct 2006 Posts: 87

i've searched the help topics already. unfortunately, it doesn't provide any details about the calculation.
#5
02-20-2012, 11:55 AM
 sophie Member Join Date: Oct 2006 Posts: 87

Quote:
 Originally Posted by MNiemerg 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.
#6
02-20-2012, 02:29 PM
 Old Timer Member SOA AAA Join Date: Sep 2001 Location: The Great East Posts: 2,052

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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#7
02-20-2012, 04:40 PM
 CuriousGeorge Member CAS SOA Join Date: Dec 2005 Posts: 1,552

Quote:
 Originally Posted by sophie 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.
#8
02-21-2012, 01:32 AM
 sophie Member Join Date: Oct 2006 Posts: 87

Quote:
 Originally Posted by CuriousGeorge 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.
#9
02-21-2012, 10:55 AM
 RichieGB Member SOA AAA Join Date: May 2005 Posts: 1,844

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.
#10
02-21-2012, 12:58 PM
 asdfasdf Member Join Date: May 2004 Location: My perception of reality Studying for nication Posts: 20,078

Quote:
 Originally Posted by sophie 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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