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April 2010 Question 5

D

dChetty

Member
The solution says :As there are surrender penalties it may be permissible to hold negative non-unit reserves, subject to certain other conditions being met. For example total reserve should be greater than or equal to the surrender value. Why is this so?
 
a)Using “rolled forward” rather than actual data to calculate reserves is an approximation to calculating reserves. Is that why rolled forward data is inadequate?
 
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