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April 2014 Q5 (ii)

T

TurnipKing

Member
Hi,

For this question when calculating the unearned risk reserve for the guarantee business why do we assume that all written premiums are eligible for the guarantee and not 1/11ths of it?

I'm interpreting the solution as saying that 1/11ths of business will have the guarantee and 10/11ths will not, but I think I might be misunderstanding this. Is it actually the case that all premiums written in the last 4 years have been given the guarantee but from a purely accounting perspective we split the premiums for the UPR between guarantee and non guarantee business with a 1/11 vs 10/11 split?

Thanks
 
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