I'm confused as to why the total risk earned is the square of the proportion offs the year that the business has been exposed. E.g for business written in Q1, which is 7/8ths through the policy year, why is the total risk earned up to year end 49/64?
Dac Hi Katherine How come the 40% method does not differentiate between net or gross of DAC? I would have set 40% of the acqusition costs as DAC.
Hi Jensen, Ordinarily, as you say, an insurer would make an allowance for DAC, and your approach would have been reasonable, had it not been for the wording of the question. The question states that the company "calculates UPR to be 40% of WP in the previous twelve months". Hence, no allowance for DAC. Kind regards, Katherine.
Hi Anushree Here is Katherine's previous attachment. You have probably noticed that the question is now Practice Question 15.15
