Hi all, I've got a question regarding reserve calculation. Would anyone be able to explain the difference between the method we use in Prospective/Retrospective calculation ( refer to chapter 21) and the method we use in chapter 28? I see the one used in Chapter 28 for both UL funds and conventional are quite similar to accounting whereas the one in Chapter 21 is relating to the expected probability etc. Are they the same thing or we are talking different reserve here?? Sorry if the question already seems confusing... Many thanks!
Hi Cherie The methods in Ch21 won't work for UL policies so you have to use the Ch28 method. For conventional policies, on page 21 of Ch28 it states that where only the final cashflow is negative or the cashflows become increasingly negative over time you can use any of the methods and get the same result. Where this isn't the case you will get different answers but the most prudent reserve is that using the zeroisation method. In practice, do what the exam tells you to do..... Bev
