Difference between revisions of "CIA.Runoff"
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(Created page with "Short Paper (1 concept): How do you deal with discounting when considering runoff? [https://www.battleactsmain.ca/vanillaforum/categories/cia-runoff<span style="fo...") |
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Note that the paper contains a numerical example of an '''accident year runoff model'''. This seems like a good exam question, but given there has been only 1 question on runoff in the past 5 years, and there are so many other important calculations on the syllabus, my guess is that this won't be asked. | Note that the paper contains a numerical example of an '''accident year runoff model'''. This seems like a good exam question, but given there has been only 1 question on runoff in the past 5 years, and there are so many other important calculations on the syllabus, my guess is that this won't be asked. | ||
| − | [https:// | + | [https://battleactsmain.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=CIA&suffix=Runoff§ion=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=1<span style="font-size: 20px; background-color: aqua; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''mini BattleQuiz 1]'''</span> <span style="color: red;">'''You must be <u>logged in</u> or this will not work.''' </span> |
==BattleCodes== | ==BattleCodes== | ||
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* none that seems likely to be asked | * none that seems likely to be asked | ||
| − | [https:// | + | [https://battleactsmain.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=CIA&suffix=Runoff§ion=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=all<span style="font-size: 20px; background-color: lightgreen; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''Full BattleQuiz]'''</span> <span style="color: red;">'''You must be <u>logged in</u> or this will not work.''' </span> |
[https://www.battleactsmain.ca/vanillaforum/categories/cia-runoff<span style="font-size: 12px; background-color: lightgrey; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 0px;">'''Forum'''</span>] | [https://www.battleactsmain.ca/vanillaforum/categories/cia-runoff<span style="font-size: 12px; background-color: lightgrey; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 0px;">'''Forum'''</span>] | ||
Revision as of 21:40, 12 January 2020
Short Paper (1 concept): How do you deal with discounting when considering runoff? Forum
Pop Quiz
What are the considerations when selecting a discount rate or expected investment return rate? (Recall that this question has been asked at least 5 times on past exams! See CIA.Discnt.)
BattlePlan
Based on past exams, the main things you need to know (in rough order of importance) are:
- how to account for the time value of money when evaluating the runoff of claims liabilities
reference part (a) part (b) part (c) part (d) E (2015.Fall #13) see CCIR.ARinstr see CCIR.ARinstr discounting & runoff:
- approachesE (2013.Fall #21) outdated discounting & runoff:
- approaches
In Plain English!
You can think of runoff as calendar year emergence.
The main concept in this reading is that standard approaches for runoff evaluation must be modified to be appropriate for a discounted basis. There are 2 ways of doing this:
- discounting approach: discount the paid & unpaid amounts at time t back to time t – 1
- subtraction approach: subtract investment income earned during calendar year t on supporting assets and liabilities (easier than the discounting approach)
Note that the paper contains a numerical example of an accident year runoff model. This seems like a good exam question, but given there has been only 1 question on runoff in the past 5 years, and there are so many other important calculations on the syllabus, my guess is that this won't be asked.
mini BattleQuiz 1 You must be logged in or this will not work.
BattleCodes
Memorize:
- 2 ways of handling the time value of money in claims runoff
Conceptual:
- Runoff can be thought of as calendar year emergence.
Calculational:
- none that seems likely to be asked
Full BattleQuiz You must be logged in or this will not work.
POP QUIZ ANSWERS
- Considerations in selecting a discount rate: MARY-(IE)-CapG
- M: METHODS: for asset valuation & reporting investment income
- A: ALLOCATION: of assets & investment income by LOB
- R: RETURN: on assets @ B/S date
- Y: YIELD: on assets acquired after B/S date
- (IE): INVESTMENT EXPENSES & losses from default
- CapG: Capital G/L: on assets sold after B/S date
