2017 Spring #19
Hello,
In part B of this question we're asked to calculate the range of surplus corresponding to RAL given that we've calculated the RBC total risk charge and are given both a Non-Tabular and Tabular discount figure. The solution shows how to use the 100% to 150% RAL range to get to the required TAC, and then adds in the discounts, to gross up to the final PHS.
The tabular discount in the question was never defined as "medical". So if we notice this, from a test-taking standpoint, should we specify "assuming the tabular discount is medical" or something? i.e. do the exam graders give us credit for things if we state our assumptions and maybe the question wasn't clear or something? Or does this risk us losing points on something; like if the information we give isn't relevant or happens to be incorrect (i.e., don't give any more info than answering the question being asked)?
Second question, Medical and LAE reserves are specifically excluded from the definition of tabular discounting. and then the definition in Odom for TAC mentions tabular discounting on medical reserves as one of the items to subtract. Outside of the Montana example where tabular discounting was allowed on Medical reserves for WC (Odom pg. 12), what's the 'default' standard here? It seems like contradictory information... am I missing something about one type of medical versus another?
Comments
Yes, it's fine to note your assumption when something in the question is not clear. You stand better chances of getting points that way.
On Odomirok page 12, footnote 5, I find the Law Manual's definition of tabular reserves being given. The statement in the definition, ". . . shall not include medical loss reserves. . ." seems ambiguous. Tabular discount on medical reserves exists. It may be that the displayed extract from the Law Manual was not the only place that tabular discount was being defined.
OK thanks! It's also defined similarly on page 180 (Odom) in the footnote referencing NAIC A.S. Instructions. SSAP 65, however, specifically states "Tabular reserves shall not include medical loss reserves or loss adjustment expense reserves." (65-3).
I think the take-away for me is to clarify it in responses; especially with the dependence on state laws, I'm sure there's not a simple one-size-fits-all.
I could not find in the Odomirok text the place where she mentions medical tabular reserves. But it is a real phenomenon and comes up in certain past exam questions where they should be treated accordingly. Graham has examples of such questions in the wiki.