Reserves Life insurance

valuation date date on which we determine valueof a policy

reserves on consider CF's over certain timeperiod

nine.gg E
AVintlowsCot

expected inflows
AVouttlowsCo

outflows

remaining premium inflows regene

t
notactual
outflows

future benefits
to
EPV.ntl.ws

d expenses

Prospective method
VP SAout tea at tf Ant Gantt whole life
Stf Ascent G e a.ae endowment
pro prospective reserve at time t
initial expenses often ignored
select mortality often ignored

Retrospective method t
Vret Gasep SAI I ease FA's x
Px
Gox p SAI I ease Fax t Dont
Select mortality often applies
similar for whole life endowment

retro
conditions for Vpro to
Bases used to calc reserves are equal mortality i expense assumptions

Basis used to calc premiums valuation basis

reserving

Gasca SAI o BIT o t 12 A A Tet I Ga to

Gaona SAIF SA E III Et 20 ta
o two
nie
Ate Ga retczo
 Variable cashflows

Geometric increases
i Cha clear
o I 2 t n
EPV Chota atJ j YI I
EPV Itc ant n

o t Casto
itb cystv
f Ctb
o I 2 t th th n

EPV Hb Axe I
EPU Hb AxteinFJ

Simple increases
Find value at t P
Use P Q method

Must for
always ignore payments at t prospective method

monthly e 12am t it at endof period

Negative reserve
GPUpremiums EPUBenefits
to

Due to profit loading already loaded into premium

Don't add profit
loading to reserve calculation
Negative prospective reserve decrease
assets since income costofproviding policy
Negative retrospective reserve not sufficient premiums poor calculation assumptions

Reasons for reserve calculations

sufficient assets to cover future benefit payments
surrender value valuation of
company
Balance of asset liabilities
 1000 Ccc

SIP 8 6
866 so py
I 2000
e Goop.at Ind 1 Stp 2ndyr
f 1000
yr

Retro
EPVincome ERUbenefit ENexpense Bsf
86 650Cigs 3 1000000 Adj 3 2000 6 5 86650

600 Cossa a 0 15786650

Gassy p 1000Assize

86650doss 51 1001000Acs's 3 14 997,5

600 14997 5 css i p 75g
Icss 1 from 2nd
p year
Prospective