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  #941  
Old 02-14-2018, 02:50 PM
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Here are a few things that come to mind from my own experience. Most of these are reinsurance-specific.

- The allocation techniques provide a way to allocate the costs of reinsurance by operating unit. Reinsurance can cover several lines of business and it is useful for the cedant to be able to allocate the cost/benefit to how they segment the business. One example where this is important is in the calculation of any long term profit sharing compensation for the cedant's underwriters.

- On an expected basis, reinsurance is typically an underwriting loss. However, there is economic gain because reinsurance reduces the capital required to support the policies. To evaluate this, you need a method for determining capital need (topics from Exam 8 but some of it is mentioned on this exam) and the cost of capital. The cost of capital can be done in a variety of ways and this exam provides several methods for determining the "fair" rate.

- Cat bonds are obviously relevant since it provides an alternative to traditional reinsurance. To understand cat bonds, you need some of the financial background in the earlier exam topics.

- There are several insurance products that behave more like financial products than a traditional insurance product. For example, credit defaults are very relevant to Surety.

- While not directly related to pricing, the behavior of investors and the financial markets helps to understand the insurance market. When you are discussing strategy and evaluating whether to write a reinsurance treaty, some of behavioral patterns can be observed. It also provides a framework for understanding the discrepancies between a technical actuarial rate and the market rate. This may be specific to reinsurance since the pricing is not highly regulated.

- Valuation is important to ERM and is covered a few times. The main paper that comes to mind is on the calculation of Franchise Value.

- The profit provision paper has use for any pricing actuary.
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  #942  
Old 02-14-2018, 05:19 PM
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There's a formula in TIA from Butsic that looks like it's written in a really confusing way to me. Specifically:
c_1 = c*(1+p) + [1+c*(1+p)]*r - pcb - g

Which seems much easier to remember as:
c_1 = c*(1+p)*(1+r) + r - pcb - g

Is there a reason to remember it the weird way? It just looks sloppy to me for some reason and the brackets make me cringe.
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  #943  
Old 02-14-2018, 10:45 PM
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Quote:
Originally Posted by Polak View Post
There's a formula in TIA from Butsic that looks like it's written in a really confusing way to me. Specifically:
c_1 = c*(1+p) + [1+c*(1+p)]*r - pcb - g

Which seems much easier to remember as:
c_1 = c*(1+p)*(1+r) + r - pcb - g

Is there a reason to remember it the weird way? It just looks sloppy to me for some reason and the brackets make me cringe.
While I agree, I think I ignored that page of the material as the TIA video said that section may not be testable.
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  #944  
Old 02-14-2018, 11:43 PM
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OTOH I don't think Angelo has a 100% hit rate on those calls
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ASM does not have a discussion of stimulation, but considering how boring the manual is, maybe it would be a good idea.
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  #945  
Old 02-15-2018, 09:20 AM
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Originally Posted by Adversely Selected View Post
While I agree, I think I ignored that page of the material as the TIA video said that section may not be testable.
I'm slowly getting a sinking feeling that I'm missing a lot by reading off a printed manual instead of watching the videos.

That was a lot of "ing"s.
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  #946  
Old 02-15-2018, 09:37 AM
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You're not missing much from the videos unless it is helpful to hear someone read the manual and insert a lot of "uhm" and "actually"
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  #947  
Old 02-15-2018, 09:59 AM
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Quote:
Originally Posted by Polak View Post
There's a formula in TIA from Butsic that looks like it's written in a really confusing way to me. Specifically:
c_1 = c*(1+p) + [1+c*(1+p)]*r - pcb - g

Which seems much easier to remember as:
c_1 = c*(1+p)*(1+r) + r - pcb - g

Is there a reason to remember it the weird way? It just looks sloppy to me for some reason and the brackets make me cringe.
It's written that way to separate the concepts. I agree that your second way is easier to memorize, but the first formula helps with understanding. Use whatever works for you.
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  #948  
Old 02-15-2018, 10:01 AM
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Quote:
Originally Posted by Adversely Selected View Post
While I agree, I think I ignored that page of the material as the TIA video said that section may not be testable.
Just be careful with this. If you look at the recent Examiner's Reports from the upper level exams, you'll see some commentary that mentions where many candidates got a question wrong since they relied on a study manual over the source.
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  #949  
Old 02-15-2018, 10:28 AM
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some of the addendum's in TIA on BKM aren't in the source imo
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  #950  
Old 02-15-2018, 12:59 PM
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