hi, I understand what is sum at risk and understand what is reserve. However, I don't know how the sum at risk would relate the the reserve, apart from sum at risk = P(die) x (S - V). Will the reserve in each year suppose to cover the sum at risk? How the sum at risk relate to the reserve? How the answer would be different between using net premium valuation and using gross premium valuation?
Sum at risk = Amount of Sum Assured not covered by the reserve = (Sum Assured) - (Reserve) E.g. on a £1m policy backed by a (say) £0.6m reserve, the "Sum at Risk" is $0.4m, and represents a loss to the insurer if the policy claims in that year.
