Hi there Section 2.8 of Ch 15 refers to New business as a source of surplus. Please could you provide another example of this (other than the TA example) as I am struggling to understand what this refers to. From a timeline perspective, is this source of surplus only relevant at the absolute start of the new policy or block of new polices. Many thanks!
If we are performing an analysis of surplus over a period, we are working out where the change in surplus (ie change in 'assets - liabilities') has come from. If any new business was written during that period, that will have affected assets (premiums in, expenses out) and it will have affected liabilities (needing to set them up for the new policies). So writing new business changes the amount of surplus, so is a contributor to the analysis of surplus arising.
