Hi,
In the core notes on page 3 of Chapter 26, it says "profit is crystallized in the year premium is earned" - that is not entirely true is it?
Agreed that as and when we are earning premiums, profits are being realized but only part of the profits should be realized, isn't it (and that too assuming business earned is profitable)? Because even if all premiums have been earned (at which point we have no UPR, assume profitable, so no AURR) , we would still be holding claims reserves (IBNR & o/s, claims handling reserves, etc.).
Hence it's only when all reserves relating to the premiums earned & unearned are exhausted, that the entire profit related to it will be realized.
I would appreciate some help on this, thank you.
Last edited: Apr 17, 2021