Spring 2017 #26
I'm looking through the examiner's report and I do not understand the following line:
Reinsurer = (359,375 x 0.875) – 427,813 = -113,359 (decrease)
I assume this is just an error and the actual answer is 14,961. Can anyone confirm?
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I'm looking through the examiner's report and I do not understand the following line:
Reinsurer = (359,375 x 0.875) – 427,813 = -113,359 (decrease)
I assume this is just an error and the actual answer is 14,961. Can anyone confirm?
Comments
The formula is correct and it yields the stated answer.
Reinsurer is commuting the reserve to the primary. So, it doesn't have it on its books anymore, so its income increases. But it paid the primary a price to do this, and that price reduces its income.