Recovery Calculation including Additional Case Reserve

There is a possibility in the system to capture and calculate Additonal Case Reserves (ACR) for assumed claims, giving the estimated development of headline losses. To monitor the corresponding net loss, we provide the possibility to include ACR in recovery calculation.

The calculation is on top of actual incurred loss, and is booked to the Outward Claim and distributed to the retrocessionaires according to their share.

The inward ACR / ACR expense must be booked to an inward claim linked to a Headline loss, Risk loss or single Claim (incl. in Rec) to be considered. Light Claim ACR bookings are not supported in Recovery Calculation for ACR.

Note: Recovery calculation with Interlocking, Recovery calculation with Indexation and Recovery calculation for Base Company is not covered for ACR.

The functionality is activated by system parameter Include ACR in Recovery Calculation

Examples of how the claim is calculated with different OCC conditions:

Example 1: Single Currency

Limits: 150.000 xs 100.000, Agg limit: 300.000

Claim Sequence: Date of Loss

Distribution Of Recovery Reserves Based on Incurred Figures - sys par NOT selected

Calculation*:

Incurred to layer before ACR for claim C: 250.000 (paid 90.000 + reserve 160.000)

Remaining to limit: Aggregate limit 300.000 - Incurred 250.000 = ACR 50.000

ACR Claim C: ACR 50.000 - ACR Claim A 35.000 = ACR 15.000

Example 2: Multiple Currencies

Limits:

EUR 150.000 xs 100.000, Agg limit: 300.000

USD 187.500 xs 125.000, Agg limit: 375.000 (fixed limit roe 1,25)

Claim Sequence: Date of Loss

Recovery Calculation for Multi Currency Protections Based on Incurred Currency split - sys par NOT selected

Calculation*:

ACR = EUR EQ: 142.000, however max to layer for Claim A = 150.000

Paid 60.000 + Reserve 14.800 –> remaining cover = 75.200

Example 3: Reserves calculated as Incurred Less Paid

Limits: 150.000 xs 100.000, Agg limit: 300.000

Claim Sequence: Date of Loss

Distribution Of Recovery Reserves Based on Incurred Figures - sys par selected

Calculation*:

Remaining to ACR: 160.000 (Aggregate limit 300.000 - Incurred to layer 140.000)

Remaining Claim C: 75.000 (remaining to ACR 160.000 - ACR Claim A+B 85.000)

Remaining Claim D: 0

Example 4: Accounting Classification split

Limits:

EUR 150.000 xs 100.000, Agg limit: 300.000

Claim Sequence: Date of Loss

Split Recoveries Proportionally on Accounting Classification - sys par selected

Example 5: Considering ACR Expenses

Limits: 150.000 xs 100.000, Agg limit: 300.000

Claim Sequence: Date of Loss

a) Expenses included as recovery figures (not booked as recovery expenses):

Original Assumed Expenses - not selected

b) Expenses Excluded from calculation:

Original Assumed Expenses selected as Excluded

c) Expenses Part of liability:

Original Assumed Expenses selected as Part of Liability

d) Expenses in addition:

Original Assumed Expenses selected as Prorata In Addition

Calculation*:

Claim A:

Retention paid 100.000 (90,90%) + Paid loss 10.000 (9,09%) = Total paid FGU 110.000 (100%) → Paid expense retention: 10.000 * 90,90% = 9.090, Paid Expense: 10.000*9,09% = 909

Reserve to layer 100% → Reserve expense: 30.000

ACR to layer 100% → ACR expense: 5.000

Claim B:

Retention paid 100.000 (66,67%) + Paid loss 50.000 (33,33%) = Total paid FGU 150.000 (100%) → Paid expense retention: 20.000 * 66,67% = 13.333, Paid Expense: 20.000*33,33% = 6.667

Reserve to layer 100% → Reserve expense: 5.000

ACR to layer 25.000 (55,56%) + ACR Through Top 20.000 (44,44%) = Total ACR FGU: 45.000 (100%) → ACR expense: 5.000 * 55,56% = 2.778 + ACR Expense Through Top: 5.000 * 44,44% = 2.222