zillmer adjustment

when questions mention 'zillmer adjustment' what value are they actually talking about? i'm sure i've seen it mean different things in different questions.

is it:

a) the amount assumed for initial expense i.e. in ZNP = NP + IE/a(x)
b) the difference between the NP and the ZNP i.e. IE/a(x)
c) the difference between the net premium reserve and the zillmerised net premium reserve i.e. IE/a(x)*a(x+t)

my question is related to exam questions of the type 'calculate the reserve when a zillmer adjustment of £500 is applied'

thanks

 

I notice that the notes say it is the difference between the NP and the ZNP, so IE/a(x) for example. However question 4.9 in the Q&A bank says 'a zillmer adjustment of 5% of the sum assured' where the sum assured is £10,000. So £500. But in the solution £500 is the amount assumed for the initial expenses, not the difference between NP and ZNP.

 

and then later on in the acted notes (just before question 20.9) it says 'I/a(x)*a(x+t) = the total zillmer adjustment'.

So all three of my definitions exist somewhere.

What is the right answer??

 

It looks like we can conclude that there is no universally agreed definition and that it can be taken to mean various things by different people. Calculations on this topic used to be asked in the Subject 105 exam (pre CT/CA/ST/SA) and there were several different interpretations in exam questions, so even the examiners weren't in total agreement. But that doesn't help you for this exam coming up, so ...

On page 16 of Chapter 20, the Core Redaing is very clear that it's ZNP-NP, so you should use that definition unless the exam question explicitly defines it in a different way. If there's any uncertainty, state what you're assuming and, that way, you should get maximum marks for your calculations.

I've just checked and Q&A Bank Question 4.9 comes from old Subject 105, where there was no set definition of a Zillmer adjustment. We should have reworded it (unless we were trying to highlight this uncertainty of definition?), so I apologise for that.

We have used "total Zillmer adjustment" to mean the adjustment to the reserve. The meaning here should be clear from the context.

 

okay thanks