PPE for UEP
Going from TIA to FAIT, we dont include m(S) but we do gain the term for PPE for UEP. Is this PPE for UEP orginially already taken into account in the m(S) term, but since we aren't including that term anymore and only want funds attributable to insurance transactions we still have to include the PPE for UEP?
Just trying to get a sense of where PPE for UEP is at in the TIA formula.
Comments
Correct. In a simplistic view,
surplus0 + income = surplus1.
Income already takes out the full acquisition expense from premium, so surplus1 includes the effect of PPE. In FAIT, we don't include m(S), because it belongs to FACS. But we still want to reflect the effect of PPE, because it's an insurance transaction. So, we reduce m(UEP) by PPE.