Numerical questions

[Raghib Ishraq]

Hi all,
For long reserving question i.e. triangulation question is it normally advised to copy all the numbers from the question paper into excel and then work on it or just calculate the link ratios and copy that in excel. Any particular advice on how to speed up the calculation process.

Also, what would be few accounts question to practice before exam?

Many thanks,
Raghib

 

[Darren Michaels]

Hi Raghib

Its really up to you, I would think it is safer to enter the data in to Excel and then do any repetitive calculations such as calculating link ratios in there. That way if you make a mistake it is easy to correct / update. In terms, of speeding up, the main thing is to practise, practise, practise, ... Other thoughts are don't spend ages making your spreadsheet look fancy (as no-one will ever see it) or working out complicated formulae that are only used one - sometimes it may be quicker to just work the answer out by hand and enter it manually or even to do the calculation on paper and then type it into word. This isn't a CP2 exam after all. Again with plenty of practise before the day of the exam itself, you should try to workout which approach(es) work best for you, as it will be a bit of a personal thing. Remember, you need to paste you answers (without links or formulae) etc to your word script and remember to explain your working.

There are lots of past exam questions on accounts to practise, I suggest you just go through as many as you can find – they’re easy to spot in past papers. If you have the ASET or Revision Notes, you should be able to find a list of them there too. One definitely worth a try is October 2011, Q5 if you haven't done that one already.

 

[Raghib Ishraq]

Thanks Darren, that's very useful

 

[Raghib Ishraq]

Hi Darren, while trying Oct 2011 Q5, I ran into a few issues in part ii accounts qs:

• Claims Incurred for Large contracts, in the solution is 20.358m x 0.65. I understand that 20.358 is the earned premiums and 65% is the loss ratio but the question that for ALL contracts claims paid would be 40% of EP. Given no large contracts were written in 2010 there would be no change in OCR. We only need to calculate claims paid for claims incurred component? Why 65% and not 40% x EP
• OCR for large contract, 25% x EP. Where does this 25% come from and why not multiply by the loss ratio as above?

Many thanks,
Raghib

 

[Katherine Young]

Given no large contracts were written in 2010 there would be no change in OCR.

It's not at all clear why you would assume no change in OCR. Written premium has increased for small contracts, so surely the OCR would change. Even for a stable premium we'd expect some (random) change in OCR.

OCR for large contract, 25% x EP. Where does this 25% come from?

The outstanding claims reserve for large contracts is:

OCR = incurred to date – paid to date

=65%*EP – 40%*EP

=25*EP

… and why not multiply by the loss ratio as above?

Hopefully, by looking at the formula above you can see why it is incorrect to say OCR=65%*EP.

 

[Raghib Ishraq]

Thanks Katherine, makes sense.