I want to know the logic behind this equation EARNED PREM = WRITTEN PREM - (CARRIED FORWARD UPR - BROUGHT FORWARD UPR)
Written Premium:- whatever receivable in the duration or whatever incept in the duration. c/f UPR:- not yet earned... so needs to be reduced. b/f UPR:- had not earned at the start of the duration, some of it will be earned in the duration and remaining will be included in c/f UPR... so needs to add back - earning part for an obvious reason, and the remaining part because we don't reduce from current written and c/f reduced it.
Similar, Incurred claims= paid claims + c/f outstandings - b/f outstandings. Paid claims:- whatever paid in the duration. c/f outstanding:- reported but not yet paid... so needs to be added. b/f outstanding:- reported but not paid at the start of the duration, some of it will be paid in the duration and the remaining will be included in c/f outstanding... so needs to be deducted - paid part because that part is already incurred in past, and the remaining part because we shouldn't add the o/s of past incurred that was added by c/f outstanding, so reduced back.
