timed out BattleActs100

Commutations: Tax Effect (HARD 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
primary insurer change in taxable income
reinsurer change in taxable income
quota-share % xx%
primary insurer DIRECT (gross) loss reserve xxx,xxx
primary insurer DIRECT (gross) ultimate loss xxx,xxx
discount factor - primary insurer p%
discount factor - reinsurer re%
REINSURER'S carried loss reserves (prior to commutation) are higher than the INSURED'S carried reserves by: 0.000
REINSURER'S ultimate loss, as a result of commutation, increased by: 0.000

Formulas

change in taxable income for primary insurer
= price – (pR-c) x d1

change in taxable income for reinsurer insurer
= (reR-g) x d2 – price

Notation

price
= commutation price

pR-c
= CEDED carried reserve for primary insurer BEFORE commutation

reR-g
= GROSS carried reserve for reinsurer BEFORE commutation

d1
= discount factor for primary insurer

d2
= discount factor for reinsurer

Solution:
primary insurer change in taxable income ----
pR-c   =   pR-g x qs%          ----
reinsurer change in taxable income ----
reR-g   =   pR-c x (% higher)          ----
pP-g   =   pU-gpR-g ----
pP-c   =   pP-g x qs%   =   reP-g ----
reU-g   =   reP-g + reR-g ----
reU+g   =   reU-g x (% increase) ----
commutation price   =   reU+greP-g ----