Death strain

[xdorax]

The reserve used to calculate death strain - does it always have to be net premium reserve ie excl expense or could it be gross too? If so how do I know which to calculate
Many thanks

 

[John Potter]

The death strain at risk is usually how much extra you would pay at the END of the year if the person died in the year [t,t+1].

DSAR = S - t+1 V

Now, the basis used to calculate the reserve depends completely on how you are told the life insurance company calculates its reserves.

If it says that they hold net premium reserves, you should calculate the reserves on a net premium basis.
If it says that they hold gross premium reserves, you should calculate the reserves on a gross premium basis.
If it says that they hold monster raving loony reserves, you should calculate the reserves on a monster raving loony basis - of course, this basis would need explaining in the question ;-)

As long as the regulators are happy, a company can set up reserves on any basis that it pleases. We can think of a reserve like a bank account, backing up the policy.

Good luck!
John

 

[xdorax]

Thanks john!