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Archive Spring 2017: Life Pricing Exam



Sept. 8, 2016

Correction to LP-139-16: Page 34, replace the 3 bullets under “Game Theory” with:

  • If they both cooperate (with each other), then both will be convicted of a minor offense and sentenced to one year in jail
  • If both defect, then both will be sentenced to jail for five years
  • If one cooperates (with the other) and the other defects, the defector will be released immediately but the other will be sentenced to 10 years in jail

Correction to LP-141-16:

The examples on Page 12 contains an incorrect analysis for Example 2. For stop-loss reinsurance, the priority (deductible) is first exhausted and then the copayment applies to the excess. The example has a priority of 80% of the premium, a capacity (maximum to be paid by the reinsurer) of 20%, and a copayment of 25%. Example 1 – claims are 70%. The priority reduces the reinsurer's obligation to 0. The insured pays the full claim. Example 2 – claims are 100%. The priority reduces the reinsurer’s obligation to 20%. The copayment reduces it to 0.75(20%) = 15%. This is below the capacity, so the reinsurer’s share is 15% and the insured pays 85%. (It appears the author used 20% as the copayment) Example 3 – claims are 115%. The priority reduces the reinsurer’s obligation to 35%. The copayment reduces it to 0.75(35%) = 26.25%. This is above the capacity, so the reinsurer’s share is 20% and the insured pays 95%. (Adding the amounts allocated to the cedant by the author, 80 + 6.67 + 8.33, produces the same result).

May 16, 2016

Learning Objective # 1 study note LP-137-16: “CIFP Knowledge Series – Product Development” has been dropped from the syllabus.