Fall 2015 #15 part a
Is there an error in the examiner's report? Why are amounts received in the last 90 days counted as $25*3? The table in the solution clearly shows that the reinsurer hasn't paid anything in the last 90 days
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Is there an error in the examiner's report? Why are amounts received in the last 90 days counted as $25*3? The table in the solution clearly shows that the reinsurer hasn't paid anything in the last 90 days
Comments
The reinsurer hasn't paid the amounts that were due in the last 90 days of 2014 (Oct, Nov, Dec). But they indeed paid the amounts due in Jun, Jul and Aug in the last 90 days of 2014, each paid 120 days after they were due, as per the given in the question.
in the answer they showed change as Prior - Current. Will I get credit by listing Current - Prior as the change (which will be positive numbers)
I think you are referring specifically to the change in reinsurance provision. That amount is shown as Prior - Current to make it additive with the other surplus change items. You would subtract Current - Prior from the other items, because an increase in reins provision decreases surplus. So, they show -(Current - Prior) = Prior - Current.
Hi, I have trouble understanding the Days Overdue part. What does "days overdue" mean and why are we counting # days between Jun 15 & Dec 31? I would think days overdue means the number of days between payment and accident date (May 1, 2014)
The problem specifies the terms of reinsurance reimbursement as billed and due on the day that the claimant was paid. Thus, "days overdue" means, had the reinsurer not provided reimbursement, it would have been overdue by that many days as of end of year. It is there to keep track of the amount that's overdue by >=90 days, which constitutes the numerator of the Test Ratio.
The question asks two changes in the surplus that do not flow through to the statement of income. However, the change of provision of RI and change of unrealized capital gain are actually appearing in the statement of income but just not in the calculation of net income. Is the format of statement of income different in 2015?
The Statement of Income arrives at the final income in Line 20. The ensuing lines make up the "Capital and Surplus Account," which is indeed a part of the Statement of Income, and they arrive at the final surplus at Line 39.
This was some inexact phrasing used in this question. They are really asking for "items that are not included in the calculation of final income."