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Thread: deficiency reserve

  1. #1
    Actuary.com - Newbie Poster
    Join Date
    Jan 2009
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    deficiency reserve

    Hi, I am from Taiwan,
    I just want to know, in US. when we calculate deficiency reserve, do we considering the policy is paid yearly or monthly??

    "Deficiency Reserve is (Net premium-annualized gross premium)*a(due)

    In our company, when we develope a new product, we calculate the gross premium paid by year first, and the gross premium paid a month is 0.088 the gross premium paid a year,not considering the interest is high or low now.

    If net premium is 1100 determined as annual paid, gross premium is 1000 determined as annual paid, so gross premium is 88 determined as monthly paid.

    For above-mentioned example,
    If the policy is paid yearly, and we use 1000 as annualized gross premium, the deficiency reserve is (1100-1000)*a(due).

    If the policy is paid monthly, and we use 88*12=1056 as annualized gross premium, the deficiency reserve is (1100-1056)*a(due), or you choose 1000, and the deficiency reserve is (1100-1000)*a(due), then the reserve
    is the same when the policy is paid yearly.

    If you calculate reserves, do you consider the policy is paid yearly or half yearly or monthly??
    OR is there any US. regulation mentioned it ??

    Thanks a lot,

  2. #2
    Actuary.com - Level V Poster
    Join Date
    Jan 2007
    Posts
    597
    Reserve minimums usually assume annual premiums.

    Other calculations (e.g., due, deferred) usually account for modes other than annual.
    I thought this WAS a real job

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