The UEPR factors do not have to be less than 1. There was an old exam
question which asked to calculate these factors and some were greater
than 1. A factor greater than 1 means that the UEPR is greater than the
deposit premium. Since the deposit premium is less than the total
premium, this could happen depending on when the audits are booked.
----------
From: Budde, Paul
To: 'Dan Bankson'; 'Test 7 Study Group'
Subject: RE: Linquanti
Date: Wednesday, July 22, 1998 11:28AM
Here is my take on the Linquanti article:
Data needed:
Total estimated annual premium
audit frequency
To reconstruct the tables for quarterly, semi-annual, annual, or
whatever frequency of audit, create the following seven columns (14 rows
of data):
#1 -- Months 1-14 (twelve month year + two month lag)
#2 -- Total premium earned. 1/24th of the estimated annual premium goes
in months 1 and 13, 0 in month 14, and 1/12th of the total in each of
months 2-12
#3 -- Cumulative total EP (accumulate the numbers in col 2)
#4 -- EP from payroll audit. These numbers should sum to the total
estimated annual premium, be paid on each audit with a two month lag.
For example, if the total EP is $2400, and the audit quarterly, then
1/4th of the $2400 = $600 is entered in months 5, 8, 11 and 14. As a
check, with the 2 month lag the final deposit should always be in month
14.
#5 -- EP from deposit = col 2 - col 4. The idea here is to take
whatever we need and don't have from the payroll audit. Numbers may be
positive or negative.
#6 -- Unearned premium reserve. For month 1 this is the deposit
premium less the 1st deposit EP (col 5). Deposit premiums are 25% of
the total estimated under monthly audits, 50% under quarterly audits,
and 75% under semi-annual audits.
For months 2-14, UPR = Prior months UPR (col 6) - current month's EP
from deposit (col 5)
#7 -- UPR factor. This is UPR/Deposit premium. Numbers should all be
less than one.
While this method of recreating Linquanti's tables is "backwards", I
think it makes more sense than trying to memorize his tables.
Paul Budde
EWB
Mpls
-----Original Message-----
From: Dan Bankson [mailto:pwhat@bickwhat.com]
Sent: Tuesday, July 14, 1998 8:45 AM
To: 'Test 7 Study Group'
Subject: Foundations--Brosius, ACTEX for Linquanti
Would anyone be willing to "loan" me a copy of the small section by
Brosius on loss development from the 1996 edition of the Foundations
text? (I have an outdated 1990 version).
I'm also looking for an option (like ACTEX) to help decipher the
Linquanti article that is generally known as incomprehensible.
I would sure appreciate any help.
Thanks! And if I can help anyone fill in the gaps with the materials,
please let me know.