• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Chapter 25 page 23

K

kiki

Very Active Member
Hi,

anyone can help me understand the following content in chapter 25 page 23 regarding estimate outwards Reinstatement prems :

" if using a factor-based approach .... should be a blended factor if the assumed recoveries are intended to be a probability weighted distribution of potential losses , rather than applying the RI prog to the modelled recoveries as if they were the best estimate ...

very confusing , definition for best estimate recoveries , isnt that same as "probability weighted distribution ..." ? also what actually this "blended factor" should be represented ?

thank you very much for your time
 
A factor based approach would for example calculate reinstatement premiums as a % of the estimated RI recoveries.

It will be some sort of weighted average percentage based on the full distribution of expected recoveries, instead of simply being based on the best estimate recoveries, to allow for the fact that there will be more reinstatements on the lower layers of cover.
 
You must log in or register to reply here.
Back
Top