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Recent content by Darren Michaels

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    Outstanding reported claims included in reserve

    The outstanding reporting claims are a component of the reserves because they relate to claim amounts which have yet to paid, so you need to hold a reserve so that you have the money to pay the claims in the future when they actually need to be paid. Of course they will only be an estimate of...
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    September 2023 Q4

    Assuming even incidence of risk: All of the premium written on 1 January will be earned by 31 December. Half of the premium written on 1 July will be earned 31 December (with the other half earned in the first half of following year). Given approximately half of premium written on 1 January and...
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    September 2010 Question 3 Aggregate Deductible (ii) Yellow Plastic

    Don’t forget the first 2.5m falls below layer 1 which is 2.5m xs 2.5m. The next 2.5m would have been recovered from layer 1 if there wasn’t an aggregate deductible, but instead erodes the aggregate deductible of 2.5m.
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    September 2010 Question 3 Aggregate Deductible (ii) Yellow Plastic

    The 8.4m after QS is correct. The first 2.5 falls below layer 1, the next 2.5 would have been recovered from layer 1 if there was no aggregate deductible, so that all erodes the aggregate deducible instead. That leaves 3.4m to go to layer 2 but it is only 80% placed so recovery from layer 2 is...
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    Chapter 15 - Section 1.3

    This is simply the definition of LEVx(X). The limited expected value of the random variable X, where values are limited to x (at most). So the first part of the expression to the right of the equality deals with the values of X>x and the integral when X<=x.
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    ST8 April 2010 Q5(iv)

    Yes Ethan, liability claims can often take many years to be settled. For example, claims that go to court can often involve and long a protracted legal battle to determine firstly who is liable and secondly how much the claim should be.
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    question 9.10ii

    The question tells us the 'Estimated ultimate claims as a % of gross earned premium' and we are also told 'the percentages of earned premium reinsured for 2022, 2023 and 2024 were 20%, 30% and 25% respectively', so for 2023, you need to multiply the gross incurred claims by 70% to get the net...
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    UPR in solvency II

    Recall from SP7 that with funded accounts, we don't separate the earned and unearned exposures, so we don't show the UPR or UPR explicitly. Under Solvency II, accounts are prepared on a one-year / accident year basis.
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    Chapter 15 - Section 1.3

    Its exactly the same as the above proof, except that the integration of S(y) is now from 0 to x instead of from 0 to infinity. The S(x)*x term comes from the first term (when y=x) when you integrate by parts.
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    Chapter 15 - Section 1.3

    Hi PBhella Please see the attached proof of the RHS of equation 1.1. You should be able to follow a similar approach to prove the RHS of equation 1.2. Have a go and see how you get on.
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    ST8 September 2017 Q8

    If you look at the individual burning costs they are clearly increasing year on year. Taking an average of them as you propose ignores this trend, so would lose you marks in the exam. Where there is a clear trend like this one, you need to start with the burning cost from the most recent...
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    April 2022 Q8 iii & iv

    I agree. It does seem like an obvious point. It would hopefully be credited under ‘other valid points’, but it appears to be an oversight that it is missing from the schedule.
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    April 2016 Question 8 (iv) IBNR Calculation

    Hi Tom You're absolutely right, when you project an underwriting year triangle you get an estimate of IBNER (always worth mentioning this separately in case it is worth another half mark), pure IBNR and reserves for claims that haven't yet happened which arise from polices already written...
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    April 2020 Q6(ii)

    1.5% * 150m is the cost of the first option of the 'Top or Drop' layer (ie the 'Top' option) not the cost of the reinstatements. We are told that the cost of the Top or Drop layer is 1.5% rate on line. The Top or Drop layer either has no reinstatements (Top option) or one free reinstatement...
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    2011 September Q2(ii)

    Notification date is another name for date reported. However it says the notification date is 02/01/09, so it belongs in row 4. 07/04/09 is the claim payment date, so it was paid within one year of the start of the origin period, hence it belongs in b41. A clear example of needing to read the...
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