Hi, I'm struggling to understand the 5 mark question on the Day 1 handout on accounting/tax. Does someone have a more step by step solution to the problem? Thanks, Raghib
Have you tried looking at the solutions handout? Presumably you have attended the tutorial, in which case do you still have the notes / slides from the tutor and don't forget if it was a Live Online tutorial, you would have been sent a link to the recording. If none of that helps, if you can be more specific about which part of the calculation you are struggling to understand, someone may be able to assist.
Given the solution does not break down the calculations, I'm a a bit confused about the Earned Premium and Claims Incurred calculation. Earned Premium = WP (100) - Increase in UPR which is 5 = 95 which makes sense. Is the RI cost 20 deducted to get 75? For claims incurred = Paid claims which is 60 and then i'm confused if it should be 60 - (OS+IBNRb/f - OS+IBNRc/f) = 50 or 60 - (OS+IBNRc/f - OS+IBNRb/f) The latter is not what the answer is. May be I'm confused with usage of the brought forward and carried forward terminology.
I don't have the question so I will explain it conceptually. For your earned premiums you will indeed need to subtract the premiums you passed on to reinsurers, brokers etc. For your claims incurred you take your claims paid amount, subtract payments related to prior years then add payments for this year that are yet to be paid. The former (=50) is the correct one.
Yep, Busybee is right. claims incurred is claims paid plus the increase in OSCR. See the last two chapters of SP7 for further details. And yes, you have the premium calc correct. If you watch the day 1 recording, you'll see me talking you through all these calcs I hope.
Thanks Ian and busybee. It makes sense now. Unfortunately, I don''t have the recording since i was present in person in the tutorial.
