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Reserving for PPO

P

PrakashD

Member
In section 9.2 "Reserving for PPO" , It is mentioned that extra amount to be reserved is called uplift for claims that will be settled as PPO instead of lumpsum. It further says that, it is possible for the uplift to be negative if the insurer uses a lower discount rate than that used to convert to lump sums.
If lower discount rate is used then the PPO present value will be relatively more, so how uplift can be negative.
 
Yes, I think you're right, looks like a typo (or maybe badly worded, given negative interest rates or something like that). We'll check with the IFoA.
 
Well that was quick - IFoA has confirmed that there's an error in the Core Reading. It should say 'higher' rather than 'lower'. We'll get this changed for the 2021 materials.
 
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