2014 Spring # 16
In the example the pooling agreement for AY 2010 started off 50-50 and then switched to 25-75 in 2012. When compiling the 2012 Schedule P part 2 why are we using the 25-75 split for losses in 2011 and 2012? Why don't we use the 50-50 split for losses in CY 2011 and 25-75 for CY 2012?
Comments
Intercompany pooling agreement applies to all portfolio years as of a given evaluation point, Dec 31 2012 in this case.
I'm bit confused here, the pooling arrangement changed in 2012, and according to the solution that new arrangement was used to calc the 2011 evaluations points.
But wouldn't that mean the documents filed for 2011 are now wrong?
I guess I just wouldn't expect the interiors of the triangle to change from what would have been calculated at the prior year.
would the companies readjust the previous paid losses to - meaning the lead now with 75% of the losses would pay back the non-lead who is now at 25% for all losses previously paid?
or does this really only effect open reserves? (and for this problem nothing is paid before 2012 so they are all reserves at the historical points)
The annual statements of the pooling companies are configured each year according to the pooling arrangement of that year. So no, prior statements are not incorrect, even though their pooling arrangement may be different.
The pooling applies to all Schedule P items, paid and reserve.
So I guess that is another example of something that can make the Sch P hard to use to eval a Company, since the year over year the triangle data can change at historic evals if the pooling arrangement changes.
Not necessarily. If you want to scrutinize a certain company, you can simply look at its latest Schedule P triangle. You don't need to compare it to the triangle of a previous year.