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#182




Can anyone explain how to solve problems like Fall2017 Q27 ad Fall2016 Q26? The solutions don't seem entirely clear to me after trying to work it out myself, because I feel like the two problems are similar but different methods to solve it.
I've posted the links to the questions below and would really appreciate it if someone can walk me through the solution. https://www.casact.org/admissions/st...m6u/f176u.pdf https://www.casact.org/admissions/st...6u/f166us.pdf Again, much thanks in advance to the kind person who'll take the time to type out an explanation! 
#183




Quote:
At its most basic  for a commuted policy year and from the perspective of the primary insurer, in the most recent calendar year the ceded reserves will be 0 and the net paid reserves will decrease by the commutation price. Other triangles adjust to reflect those changes. Two components of a commutation change taxable income  the commutation price/premium and the addition or closure of reserves. For the primary insurer, the commutation premium increases taxable income (because it's cash in) and that's offset by the increase in discounted reserves reassumed from the reinsurer. The solutions look different because they're based off of different starting data  in the F17 problem, you're given the ceded paid amounts and the net reserves. In F16 you're given the direct paid and direct reserves. F17a asks you to price the commutation to result in no income tax for the primary  in this case you set the total change in taxable income to the negative of the current taxable income, so that total taxable income after the commutation is equal to 0, and solve for the implied commutation price. F16b asks for the change in taxable income with a set commutation price for each insurer. For the triangles questions, the difference in solutions comes from being given different starting triangles. This is a massive wall of text, let me know where it gets confusing or if there's anything I can clarify. 
#185




Quote:
I assume you are referring to the triangles. #27 Net paid loss triangle. You are given the ceded paid loss triangle. Since it's 25% QS, the net is 250 x 0.75 ÷ 0.25 = 750 350 x 0.75 ÷ 0.25 = 1050 That is, divide by the QS % to get the Gross Paid and then multiply by 1  QS% to get the retained paid. Then on the last one, where the commutation is, you SUBTRACT the commutation price. So, 450 x x 0.75 ÷ 0.25  250 = 1100 750 1050 1100 750 1050 750 The net ultimate one is the Net reserves + the net paid from the previous part. So, 1500 + 750 = 2250 1100 + 1050 = 2250 The last part, where the commutation is you have to also add in the reserves from the reinsurer that are being reassumed by the insurer. So, 900 + 300 + 1100 = 2300 2250 2250 2300 2250 2250 2250 #26 They give you DIRECT paid loss instead of CEDED paid loss. But it's easy because it's 50% QS. So, half of it is ceded and half is retained. Net paid loss is just half. So at 12 months, it's 50% x 1000 = 500. Then at 24 months it's 50% x 2000  700 [the price of the commutation] = 300 500 300 500 Then the Net Ultimate is the same, but we have direct again, so you have to take 50%. 50% x 2000 + 500 = 1500 Then where the commutation is, the whole 1500 + the 300 net paid = 1800 1500 1800 1500 Then the third one  Reinsurer's gross ultimate  is different. But, Since it's 50% QS, the first column is the same  1500. The 24 months one is just the amount of the paid losses + the commutation price. There are no reserves because that's the point, right. So, they've already paid 1000 and then they paid another 700 for the commutation. So, 1000 + 700 = 1700. 1500 1700 1500 And of course, at each point the sum of the insurer's and reinsurer's ultimates are equal to the gross paid + gross reserves.
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#186




Ugh: the fall 2018 examiners' report is badly written and even has straight up typos in calculations.
Yay?: I'm familiar enough with some of the material that I'm noticing and then verifying what I think are typos (but I'm probably missing others) 
#188




What's the difference in the treatment of Discounted Loss Reserves in income tax between F17 q21 and Sp15 q17? Seems like the solution adds it for Sp15 and subtracts it for F17.
https://www.casact.org/admissions/st...u/sp156US.PDF https://www.casact.org/admissions/st...m6u/f176u.pdf 
#190




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