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Difference between different Basis

K

karanbansal1110

Member
Can anyone tell me the Practical differences between :

Valuation basis
Pricing basis
Reserving basis
Premium basis

so that i can be able to visualize accurately these concepts in my mind throughout the subject

Thanx in Advance
 
Hi,

The premium and pricing bases are pretty much the same thing - this is the basis we use when deciding on the appropriate premiums to charge the policyholder for the product. The term "pricing basis" is slightly more generic since it can cover unit-linked products where we're trying to determine the changes to levy, rather than the premiums.

The reserving basis is used to value the liabilities for demonstrating solvency for supervisory purposes.

The term "valuation basis" needs a context before we can say what it means. We could be valuing business for one of several purposes, eg demonstrating solvency (reserves), determining ongoing profitability of existing business (EV reporting), valuing business for sale or purchase, ... Each of these purposes could use a different basis.
 
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