2 regarding proposed amendment Variation of Best Refers to the following Expected not to be Reflect the increase of Best Estimate on risks cases: applicable. estimate due to claims covered during the occurred during the (part of) period (only for period. Premiums accident year) Provisions at Year The increase in claim R0200 end N-1 which provision would be higher turned to Claims than the decrease of Provisions at year premium provision, e.g. in end N because multiyear contract claim has occurred during the period claims provisions related to claims occurred during the period (for which there was no Premiums provisions at year end N-1) Variation of Best The concept of This cell is the This cell is the difference Estimate due to unwinding may be difference between the between the adjusted unwinding of illustrated as follows: adjusted opening BE opening BE and the BE that discount rate - Calculate the Best and the BE that results results from the risks covered prior Estimate of year N-1 from the application of application of the shifted to period but using the the shifted one year one year ahead term (R0060/R0210) shifted interest rate term structure (i.e structure (i.e the one year term structure in the one year forward forward curve). order to isolate this curve). strict scope of For the cells variation For the cells R220-R240 R0240 the forward the forward curve is curve is applied. applied. Variation of Best Premiums, claims, and Example 1: claim provision Estimate due to surrenders that were of 100, paid 105 during the year N projected in forecasted on the year. This row should show and out risks Opening Best Estimate -100. – accepted/covered (related to risks accepted/covered prior to period) as to
2 regarding proposed amendment Variation of Best Estimate on risks covered during the period (only for accident year) R0200 Refers to the following cases: (part of) Premiums Provisions at Year end N-1 which turned to Claims Provisions at year end N because claim has occurred during the period claims provisions related to claims occurred during the period (for which there was no Premiums provisions at year end N-1) Expected not to be applicable. Reflect the increase of Best estimate due to claims occurred during the period. The increase in claim provision would be higher than the decrease of premium provision, e.g. in multiyear contract Variation of Best Estimate due to unwinding of discount rate - risks covered prior to period (R0060/R0210) The concept of unwinding may be illustrated as follows: Calculate the Best Estimate of year N-1 but using the shifted interest rate term structure in order to isolate this strict scope of variation This cell is the difference between the adjusted opening BE and the BE that results from the application of the shifted one year term structure (i.e the one year forward curve). For the cells the forward curve is applied. This cell is the difference between the adjusted opening BE and the BE that results from the application of the shifted one year ahead term structure (i.e the one year forward curve). For the cells R220-R240 the forward curve is applied. Variation of Best Estimate due to year N projected in and out – risks accepted/covered Premiums, claims, and surrenders that were forecasted on the Opening Best Estimate (related to risks accepted/covered prior to period) as to Example 1: claim provision of 100, paid 105 during the year. This row should show -100. R0240
Variation%20Analysis%20-%20explanation_29062017_cl.docx