Fall 2018 Q15

Having difficulties relating the notations to the figures in the problem. For example, for the slow pay ratio, the formula would be Pn90/(Pn + received amounts) right?

The examiner reports uses unpaid amounts to get there. What exactly is Pn90 in this problem?

Comments

  • okay after staring at this for a while - are all notations "reversed" since we're looking at this from the perspective of the reinsurer? so all "paid recoverable" notations actually correspond with the unpaid amounts due from the reinsurer since those are the paid recoverables when looked at from the view of the insurer?

  • To your first post: Yes, that's the slow-pay formula. It might help to review Alice's solution to Schedule F - 2017.Spring Q14 which you can find in this section of the wiki:

    I made up this notation myself because the source text didn't have any and I had trouble keeping everything straight in my mind. The way I think about it is that "P" stands for paid loss and this is from the primary insurer's point of view. But in this context, it's more specific than that. It refers to losses paid by the primary insurer that are recoverable from the reinsurer. (Maybe it would have been better to use "R" instead of "P".)

    Anyway, to answer your question in your second post: These recoverable amounts "P" would indeed correspond to "unpaid" amounts from the point of view of the reinsurer. I thought it made more sense however to think of it from the perspective of the primary insurer since it's the primary insurer for whom we're calculating the provision for reinsurance.

    I see that the examiner's report calls them "unpaid paid recoverables", where the "unpaid" is from the perspective of the reinsurer. That makes sense in the context of how they present the given information since there is a column labelled "Status of Reinsurer's Payment". If this had instead been labelled "Status of Primary Insurer's Recoverable", then my notation would make more sense. (This is the kind of issue that crops up when there isn't agreed upon notation. Everyone has their own way of labelling things and I don't see an easy way to resolve it. I suppose you just have to be very clear in your own mind whose perspective you are looking at things from, and then interpret the given information appropriately.)

  • I don't think it's reversed?

    Pn90 is the late, not in dispute recoverables. In this case for A that's the one that was due Sept 1 (the others are in dispute or not 90 days overdue), so 6.

    Oh, wait, I think I see what you're saying--perhaps it would be clearer to say the P denotes "recoverables on paid loss" rather than "paid recoverables"? Compare to, say, the data shown in Fall 2014 Q15 which explicitly shows recoverables on both paid and unpaid loss (as part of a larger Surplus problem).

    Setting aside the notation for a moment, I think it makes sense that with the reinsurance provision you're worried about not getting the money from the reinsurer, so it's the stuff they ****haven't**** paid you for yet that you're worried about.

  • Thank you both! Yes I believe it's just the set-up of this particular problem that gave me an issue but once I looked at it from the view of the reinsurer the numbers began to click.

    This was a good problem since it's different from the practice ones in the section!

  • Yes, it's probably better to say that "P" stands for "recoverables on Paid losses" (rather than Paid recoverables.) I made a note about that in the wiki and linked to this discussion in case anyone else has a similar query.

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