Costs

Costs

On the Claim condition there is a possibility to record a Cost/Expense clause and a Calculation Method. This will impact the FGU Distribution depending on the selected calculation method.

Cost Clause defined as None or Part of Liability #

When the Cost clause is defined as either None or Part of Liability they are considered as part of the Loss Amounts. The system deducts the excess proportionally from both. Note that if you have inuring amounts, the system calculates the proportionate excess using amounts net of inuring amounts.

  • Incurred expenses = Incurred expense less proportionate excess less Paid expense, maximum Incurred expense /(Incurred Loss + Incurred Expense) * Cover
  • Paid expenses = Paid expense less proportionate excess, maximum Paid expense /(Paid Loss + Paid Expense) * Cover
  • Reserve expense =Incurred expense - Paid expense

Cost Clause defined as Proportionate Stabilised or In Addition To #

When the Cost clause is defined as either Proportionate Stabilised or In Addition To the cost amounts are considered separately, and are calculated as follows:

  • Paid expenses = Paid loss to layer / FGU Paid loss * Paid Expenses FGU
  • Incurred expenses = Incurred loss to layer/ FGU Incurred loss * Incurred Expenses FGU
  • Reserve expenses = Incurred expenses - Paid expenses

This method will in some situations result in positive expense reserves, as expenses cannot be charged to a layer before the loss is affecting the same.

Cost Clause defined as Follow Form or No Automatic Calculation #

Costs recorded as FGU Advisory amounts are not calculated or distributed towards the sections. The excess point is deducted from the Loss Amounts only (Paid Loss, Loss Reserve). Manually booked expense amounts are reflected in the Distribution

Calculation of ACR LAE #

If your System Administrator has activated the functionality for Additional Case Reserves in FGU, you may also register expense reserves for the ACR, ACR LAE.

The calculation of the ACR LAE distribution follows the same principles as ordinary Costs/Expenses, and depends on the Cost/Expense Clause.

If Expenses are Part of Liability / None / Not defined:

  • ACR LAE = Incurred Loss with ACR/ACR LAE less excess less distributed Paid Loss, Reserve Loss, Paid Expense, Reserve Expense * ACR LAE / (ACR +ACR LAE)

If Expenses are In Addition To:

  • ACR LAE = ACR to layer / ACR FGU * ACR LAE FGU