In chapter 2 page 34, the notes indicate that SAOs include results on a gross and net of reinsurance basis, and that the net opinion must also allow for ULAE and bad debt on expected RI recoveries. What does ULAE have to do with a net basis? It doesn't have anything to do with reinsurance?
The Profession has issued an Advisory Note on this. Have a look at http://www.actuaries.org.uk/researc...nallocated-loss-adjustment-expense-provisions
Kathy really provided with a valuable resourse. Thanks so much! The key paragraph in the document is as below. "The net reserve for ULAE will include the estimated cost of activities related to outwards reinsurance. It can be argued that the gross reserve for ULAE would not include the cost of such activities and that therefore the gross ULAE reserve would be less than the net ULAE reserve. We note, however, that the Lloyd’s Valuation of Liabilities rules reads (paragraph 11): “For practical reasons, it should be assumed that the costs of handling gross claims and reinsurance recoveries should be included in the gross provision for Unallocated Claims Handling Expenses.” That is, for the purposes of the Syndicate Return, Lloyd’s requires the gross ULAE reserve to be the same as the full net ULAE reserve."
