Cantin and Trahan

Card Set Information

Author:
ED_6C3
ID:
270355
Filename:
Cantin and Trahan
Updated:
2014-04-12 19:25:51
Tags:
6C
Folders:
CIA Calculation
Description:
6C
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  1. Premium liabilities
    • all the anticipated net costs to discharge the insurance company‚Äôs obligations with respect to its insurance policies and reinsurance contracts except its claim liabilities
    • components include UEP, premium deficiency, DPAE, etc.
  2. 4 categories of premium liabilities
    • future claims and adjustment expenses on inforce policies
    • administrative costs of servicing the inforce policies (maintenance costs)
    • anticipated premium adjustments
    • anticipated reinsurance expense or commission adjustments
  3. Equity in the unearned premiums (EQUP)
    • expected profits on the unexpired policies
    • EQUP = UEP - Expected losses on UEP - Expenses
  4. DPAE
    • asset which amortizes the prepaid expenses over the policy period, provided that such costs are recoverables from expected profits
    • results in a better match between premium (income) and expenses
  5. DPAE vs EQUP
    • if EQUP < 0 and |EQUP| < DPAE, reduce DPAE by amount of deficiency
    • if EQUP < 0 and |EQUP| > DPAE, premium deficiency must be booked
    • if EQUP > 0 and |EQUP| < DPAE, DPAE reduced to EQUP
    • if EQUP > 0 and |EQUP| > DPAE, DPAE booked as is

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