CIA.Discount

Question 1

Considerations when determine which 2 out of net, gross and ceded should calculated

Answer 1

• Data availablity
  
  • if ceded data is thin, then can’t use ceded
• Payment pattern/ CFs volatility
  
  • payment pattern are different btw ceded &net then directly calc gross & net
• Reinsurance - type and consistency
  
  • if reinsurance program changed significantly over the period, can’t use ceded
  • if net retention level has changed siginificantly, can’t use net
• Discount rate
  
  • if discount rate for ceded & net are different, then calc net & ceded directly

Question 2

Considerations of selecting a discount rate/expected investement return rate

Answer 2

Hint: MARY- (IE)-CapG

• Methods of asset valuation & reporting investment income
• Allocation of assets &investment income by LOB
• Return on assets @ B/S date
• Yield on asset acquired after B/S date
• Investment Expenses & loss from default
• Capital Gain/loss on assets sold after B/S date

Question 3

Considerations of creating homogeneous gropus

Answer 3

• groupings use payment pattern of groups used for valuation of undiscounted
• length of payout period
• any pre-determined schedule of payments

Question 4

Type of CFs related to Premium

Answer 4

• future claim&LAE
• future reinsurance cost
• maintainance fee