Chapter 21: Net Premium Reserves

Hi everyone,

For the Net Premium Reserves:
1) Should you calculate your net premium using the reserving basis and not the premium basis used to calculate the actual (gross premium)?
2) Should you include past bonuses when calculating the reserve and ignore future bonuses (including terminal bonuses)?

Thanks!

 

Hi Bernadette.
You calculate premiums using the premium basis and reserves using the reserving basis. Literally follow what it says in the question.
Past bonuses cannot be taken away from the policyholder once they have been declared, so yes, include them (although again it should make clear in the question what bonuses have been declared etc).
Bev

 

Thank you!