Hi, just had a query on the commentary in the examiner report for the section: in this question, the net prem calculation reflects a guaranteed bonus- how would this calculation look like without the guaranteed bonus? Thanks!
For endowment assurances the net premium reserve can be calculated using the formula on page 37 of the Tables. However, because bonuses on this policy are guaranteed from outset, this is effectively a simple increasing endowment assurance. Therefore, we have to work out a net premium and then a net premium reserve ie ignore expenses. If bonuses were not guaranteed then we could potentially use that formula. With policies such as these there are post bonuses and future bonuses to consider. If future bonuses are uncertain then they could either be assumed to be 0 or some assumption for them could be made. For the purposes of CM1 these problems are often simplified such as in this case where the bonuses are guaranteed and set to be level throughout the policy.
