PACICC excel problems #4
Here we have the liquidator giving us an amt and I can follow that we always just give them the difference between the advanced pmt and what the liquidator gave us, but what about premium? In this question we're not given the pol effective date so we cant determine the unearned prem but lets say we could.
If the prem reimbursement amt is 1500 but the difference between the liquidators amt and the advanced pmt is 1000, is the p/h still entitled to the remaining 500?
Q#4, #5, #6 have different recovery values to the solutions sheet btw
Comments
on #4 as well, mortgage is excluded from PACICC. So why does the insured gets more than 70% of unearned prem for his automobile policy (which we can't calculate here) + his auto policy $loss - ded?
I would think that the maximum money the insured could get from PACCIC would be:
70% min(unearned prem ; 2500) + 479 208 - ded.
am I missing something? is it just in the "advance" that mortgage is not covered?
I developed these problems, and a colleague recently pointed out the same things to me.
The point of the question was to illustrate the way money flows in solvency scenarios. Unfortunately, the way this is executed needs some work, which I will be fixing this weekend.
@mandatory_coverages this is a really good question. The source material specifically gives an example (I have changed the numbers for the new limits) where a claim is $600k, the personal property limit is $520k, and PACICC eventually recovers $580k. In this scenario, $520k would have been advanced to the policyholder, with an additional $60k provided after the PACICC receives the $580k from the liquidator. It does not give any details about unearned premium, but I would assume that additional amounts are prioritized for policyholders who have claim amounts not indemnified. I don't think additional funds would be used to top up unearned premium, but it might be possible.
@gabquietudie this is a mistake in the question. You are correct in that mortgage is not covered. The policyholder should only recover additional amounts if claim amount > PACICC limit. I will fix this issue in the questions.
Overall, both of you are thinking deeper than just math-ing the question, which is great to see. Great catches by both of you. Thanks!
So to confirm
If loss is 500K, but liquidation amt given to PACCIC is 580K, would the policy holder get the full 580K? would they get 500K + prem reimbursement? or just 500K?
If loss 600K, liquidation is 580K, they get the full 580K because the total loss amt > liquidation amt, and they likely wouldn't get any prem reimbursement?
My understanding is
1. 500K + prem reimbursement
2. 580K (they get the greater of (min(limit, loss)) and min(liquidation, loss)
Just FYI...
"Q#4, #5, #6 have different recovery values to the solutions sheet btw"
Yes, I have yet to fix the issue with these questions. All issues identified above will still be present. I can notify this thread when they have been corrected, if you would like.
Hello, thanks for making any adjustments! If you are going to change the numbers for Q4-6 then pls forget about my question...If not, for #6, how is it that the amt of loss is 484,210 but the insured was advanced for 485,027 which is more than the loss?
I believe the file has yet to be changed. If I am understanding properly, Q4-6 have to be changed (the questions have to change to match the solutions - the solutions have the right numbers). With this correction, I think your question regarding #6 should be fixed! Thanks!
Will also get back to you shortly on the correction of the file as well - Thanks!
This has been corrected. Thanks.