Recovery Calculation with Indexation
Recovery Calculation with Indexation - Calculation when multiple base index #
Index clause
UK Cost Index - Base Index Date 01/01/2011 - Contractual Base Index 100 Standard index - cover increases - payments
Limit: 400,000 xs 100,000
UK Cost index
| Date | Value | Conversion factor |
|---|---|---|
| 01.01.2011 | 100 | 1.0000 |
| 01.01.2012 | 110 | 1.0000 |
| 01.01.2014 | 120 | 1.0000 |
| 01.01.2014 | 100 | 1.2000 |
| 01.01.2015 | 110 | 1.2000 |
| 01.01.2016 | 120 | 1.2000 |
Contributing details - one recovery claim
| As of date | Due date | Entry code | Nom amt | Index point | Ind adj amt |
|---|---|---|---|---|---|
| 31.12.2012 | 31.12.2012 | Paid loss | 120 000,00 | 110 | 109 090,91 |
| 31.12.2013 | 31.12.2013 | Paid loss | 140 000,00 | 110 | 127 272,73 |
| 31.12.2014 | 31.12.2014 | Paid loss | 200 000,00 | 120 (100 conv) | 166 666,67 |
| 31.12.2015 | 31.12.2015 | Paid loss | 80 000,00 | 132 (110 conv) | 60 606,06 |
| 30.04.2016 | 30.04.2016 | Paid loss | 80 000,00 | 144 (120 conv) | 55 555,56 |
| Total paid | 620 000,00 | 519 191,92 |
Index ratio: 1,19416342
Ind adj cover and xs 477,665.37 xs 119,416.34
Recovery bookings:
| Recovery EC | Amount |
|---|---|
| Paid retention | 119 416,34 |
| Recovery | 477 665,37 |
| Paid TT | 22 918,57 |
Explanation:
Index points retrieved from row with Base index 01/01/14 are converted into value in “old” row, by multiplying with conversion factor.
The index adjusted amount is calculated for each nominal adjustment.
The index ratio is found by dividing the sum of nominal adjustments by sum of index adjusted adjustments.
The index ratio is applied to cover and excess.
The nominal claim amounts are used in the calculation, but using index adjusted cover and excess. |
Recovery Calculation with Indexation - Reserve Indexation Method ‘BYRP at Recovery Order’ #
Norwegian Cost Index - Base Index Date 01/01/2015 - Contractual Base Index 100
| Index date | Index point |
|---|---|
| 01.01.2015 | 100 |
| 31.08.2015 | 110 |
| 31.10.2015 | 120 |
| 31.12.2015 | 130 |
| 29.02.2016 | 140 |
Reserve Index Method is Booking year and Period at Recovery Order, which means that the end date of the booking period will be used to find index point for accumulated recovery reserves.
Default method Inward reserve latest as-of-date would have given the same result for calculation as per 31.12.15 and 29.02.16
| Layer | Cover | Excess |
|---|---|---|
| 1st layer | 100.000 | 100.000 |
| 2nd layer | 300.000 | 200.000 |
Recovery Calculation with Indexation - Aggregate Limit #
When calculating indexed recoveries, nominal FGU amount is applied to the indexed Cover and Excess of current claim. Cover and Aggregate limit is calculated separately for paid and incurred figures, using the respective index ratios. To monitor the used aggregate limit (and cover), the used recovery is calculated as a percentage and applied to the nominal aggregate limit for both paid and incurred loss to layer.
Example:
