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Prospective & Retrospective

J

JohnnySinz

Member
Hey all,

I am having trouble understanding the concept of retrospective and prospective policy values.

Algebraically, I have no issue as memorizing the formulae seems to work for most basic questions.

Yet I was hoping someone could provide a detailed, intuitive explanation of what these two methods are actually achieving :/
 
Hi Johnny Sins,

Retrospective- from the past.
Prospective- from the future.

So, when you want to measure reserve retrospectively- you'll accumulate the net fund from the past.
And for prospective- you'll measure Expected Present value of (Net liabilities in the future)
 
Yes, that's right. I also think about the retrospective reserve as being the amount of money you've GOT from the policy right now, whereas the prospective reserve is the amount of money you NEED for the policy right now.

So if you've got more than you need you'll be expecting to make a profit on the policy, but if you need more than you've got, you'll be expecting to make a loss.

Robert
 
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