Hi, For mock exam A question 1 accounts question, I still don't understand on how to calculate the unexpired exposure for product X even after reading the solutions and marker's comments. For some reason I can't send my attachment which shows my interpretation of the question, so I have sent my interpretation to ST7@bpp.com It would be great if you could reply with a diagram to show the unexpired risk exposure. Also, I understand to calculate the AURR you have to adjust for claims inflation, prem rate change and discount it. Why do we have to do this just for the AURR? i.e. you don't discount the other components of reserves, but you have to do it for AURR. Thanks.
Have a look at the attached document. With regards to your second question, we're getting into SA3 territory. For ST7, it's sufficient to know that "that's the rule"!
Ok thanks. I understand the doubling of risk exposure at q4. But why do we have to look at contracts written in middle of each quarter. Why can't we just assume that contracts are written half way through the year and then apply the uneven risk? Why do we have to consider each quarter separately?
You could do, but it wouldn't be so accurate. We're given information for the level of risk in each quarter, so we ought to carry out our calculations by quarter.
