BattleActs100

Commutations: Tax Effect (EZ version!)

myID_+ priorDate_+ record_+ WET_+ fadeFactor_

Calculate the change in taxable income for both the insurer and reinsurer due to the commutation.

  current score:
0.000

quota-share % xx%
commutation price xxx,xxx
discount factor - primary insurer 0.000
discount factor - reinsurer 0.000
REINSURER'S carried loss reserves (prior to commutation) are higher than the INSURED'S carried reserves by xx%
primary insurer DIRECT loss reserve x,xxx,xxx

Formulas

change in taxable income for primary insurer
= P – R1d1

change in taxable income for reinsurer insurer
= R2d2 – P

Notation

P
= commutation price

R1
= CEDED carried reserve for primary insurer

R2
= GROSS carried reserve for reinsurer

d1
= discount factor for primary insurer

d2
= discount factor for reinsurer

Step i.1:  Net Paid before commutation
PolYr 12 24 36
PY-2 ---- ---- ----
PY-1 ---- ----
PY ----
Answer to (i)
Step i.2:  Net Paid after commutation
PolYr 12 24 36
PY-2 ---- ---- ----
PY-1 ---- ----
PY ----
Step ii.1:  Net Ultimate before commutation
PolYr 12 24 36
PY-2 ---- ---- ----
PY-1 ---- ----
PY ----
Answer to (ii)
Step ii.2:  Net Ultimate after commutation
PolYr 12 24 36
PY-2 ---- ---- ----
PY-1 ---- ----
PY ----