Calculate Loss Participation

If you want the SICS to calculate the Loss Participation, the conditions must be defined. Refer to Deductible condition, type Loss Participation. Conditions must be equal for all Retrocessionaire’s (no special Reserve condition).

Loss Participation is calculated according to the frequency defined on the conditions, but cannot be calculated more frequent than the Accounts. The Loss Participation is calculated on cumulated figures per Insured Period. The calculation of the Loss Participation amount is depending on the Loss Ratio and the fixed rates defined for Min/Max Loss Ratio.

The Loss Participation is calculated as a total and is shown in the Loss Participation Statement. If bookings are made in different currencies, bookings for all currencies are converted into Main or Base currency. The currency is defined in the field Profit/Loss Currency in the Administration conditions/Currencies tab and the overall Loss Participation amount is booked in this currency only. (Refer to Administration Conditions.)

If bookings are made on different Accounting Classifications, the overall Loss Participation Amount is proportionally split and booked on each Accounting Classification according to the Reserve (when condition Deduct from Reserves) or according to the Paid Losses (when condition Deduct from Paid Losses).

The Loss Participation can be deducted from one of the following:

Paid Losses

Loss Reserve

Paid Losses, then Reserves

Reserves, then Paid Losses

Calculate Loss Participation Amount #

A.1) Loss Ratio is used to find the Min Loss Ratio percentage to be used in the calculation. The Loss Ratio is found by dividing the Loss by the Premium and expressed as a percentage. (Refer to fields Premium and Loss in section ‘Loss Ratio Definition’ on condition). The Premium and Loss are cumulated figures and are calculated per Insured Period.

Which Entry Codes to be included in the selected Entry Code Groups for Premium and Loss is decided by your System Administrator. (Refer to the Reference Item/Entry Code Group Category Premium Basis for Loss Ratio and Loss Basis for Loss Ratio).

If ‘Include Reserve’ for Premium and Loss is selected, the bookings with Entry Codes within the Entry Code Sub Category Original Premium Reserve and Original Loss Reserve are included in the calculation of the Loss Ratio. (Refer to Entry Code Maintenance, Entry Code Category Reserve).

Example - Loss Ratio;

Group selected for Premium includes Entry Codes; ‘10’
Group selected for Loss includes Entry Codes; ‘30’

Bookings on the Retrocessionaire Participation Business Ledger,

*) Entry Code in Entry Code Sub Category Original Premium Reserve/Original Loss Reserve.

1. ‘Include Reserve’ is not selected on the condition.
   Loss Ratio: 20.000/45.000 * 100 = 44.44%

2. ‘Include Reserve’ is selected on the condition.
   Loss Ratio: (20.000 + 10.000) / (45.000 - 5.000) * 100= 75,00%

A.2) Loss Participation Limit is found by multiplying the accumulated Premium(refer to selected Entry Code Group Premium on condition_)_ for all Accounting Years of the Insured Period with the _Min Loss Ratio_ (refer to the table on the condition_).._

A.3) Incurred Losses in Excess of Limit is found by deducting the Loss Participation Limit from the cumulated Loss(refer to selected Entry Code Group Loss on condition).

A.4) Provisional Loss Participation amount is found by multiplying the Incurred Losses in Excess of Limit with the Loss Participation Rate (refer to the table on the condition).

A.5) Max Loss Participation Amount is found by multiplying the Premium(refer to selected Entry Code Group Premium on condition) with the Max Pct of Premium rate (refer to field on condition).

A.6) Final Loss Participation Amount is found in this way:

If Provisional Loss Participation Amount is smaller or equal to the Max Loss Participation Amount, then the Final Loss Participation Amount is equal to Provisional Loss Participation Amount

If Provisional Loss Participation Amount is greater than the Max Loss Participation Amoun t, then the Final Loss Participation Amount is equal to Max Loss Participation Amount.

Calculate Loss Participation Amount

- A) when Deduct from Loss Reserve

A.7) Final Loss Participation Amount i.r.o Loss Reserve;

If Original Loss Reserve Amount is less than the Final Loss Participation Amount, then the Original Loss Reserve Amount is used in the calculation.

If Original Loss Reserve Amount is greater than the Final Loss Participation Amount, then the Final Loss Participation Amount is used in the calculation

A.8) Loss Participation Adjustment Amount i.r.o Loss Reserve;

Final Loss Participation Amount less previously accounted Loss Participation i.r.o Loss Reserve.

The Result of the calculation is booked with an Entry Code defined for the system parameter Entry Code Usage/Calculation Loss Participation i.r.o Reserves. Which Entry Code is selected for the calculation is decided by your System Administrator.

Example;

Conditions:

Loss Participation table;

Bookings on RP Business Ledger;

*) Entry code in Entry Code Sub Category Original Premium Reserve/Original Loss Reserve

**) Loss Ratio (20.000 + 10.000) / (-45.000 + 5.000) * 100 ) = 75,00% >> Min. Loss Ratio 70,00% and Loss Participation 40,00%

***) Refer to Loss Participation - formulas last in the chapter for calculation of 3M.

Calculate Loss Participation Amount

- B) when Deduct from Paid Losses

B.7)Final Loss Participation Amount i.r.o Paid Losses;

If Paid Losses Amount is less than the Final Loss Participation Amount, then the Paid Losses Amount is used in the calculation.

If Paid Losses Amount is greater than the Final Loss Participation Amount, then the Final Loss Participation Amount is used in the calculation

B.8)Loss Participation Adjustment Amount i.r.o Paid Losses;

Final Loss Participation Amount less previously paid Loss Participation Amount i.r.o Paid Losses

The Result of the calculation is booked with an Entry Code defined for the system parameter Entry Code Usage/Calculation Loss Participation i.r.o Paid. Losses. Which Entry Code is selected for the calculation is decided by your System Administrator.

Example

Conditions;

Loss Participation table;

Bookings on RP Business Ledger;

*) Entry code in Entry Code Sub Category Original Premium Reserve/Original Loss Reserve.

**) Loss Ratio (27.500 + 9.000) / (-50..000 + 5.500) * 100 = 82,02% >> Min Loss Ratio 76,00% and Loss Participation 20%

***) Refer to Loss Participation - formulas last in the chapter for calculation of 3L.

Calculate Loss Participation Amount

- C) when Deduct from Paid Losses, then Reserve

C.7) Paid Losses in excess of Limit;

Paid Losses Amount less the Loss Participation Limit.

C.8)Provisional Loss Participation Amount i.r.o. Paid Losses;

Paid Losses in excess of Limit is multiplied with the Loss Participation rate

C.9) Final Loss Participation Amount i.r.o. Paid Losses

If Provisional Loss Participation Amount i.r.o. Paid Los s_es_ is less than or equal to the _Max Loss Participation Amount_, then the _Final Loss Participation Amount i.r.o. Paid Losses_ is set to the _Provisional Loss Participation Amount i.r.o. Paid Los_ s_es._

If Provisional Loss Participation Amount i.r.o. Paid Los s_es_ is greater than the _Max Loss Participation Amount_, then the _Final Loss Participation Amount i.r.o. Paid Losses_ is set to the _Max Loss Participation Amount._

C.10) Provisional Loss Participation Amount i.r.o Loss Reserves

Provisional Loss Participation Amount less Provisional Loss Participation Amount i.r.o. Paid Losses.

C.11) Final Loss Participation Amount i.r.o. Loss Reserves

Final Loss Participation Amount less the Final Loss Participation Amount i.r.o. Paid Losses.

C.12) Loss Participation Adjustment Amount i.r.o. Paid Losses

Final Loss Participation Amount i.r.o. Paid Losses less the Previously paid Loss Participation Amount i.r.o. Paid Losses

C.13) Loss Participation Adjustment Amount i.r.o. Loss Reserves

Final Loss Participation Amount i.r.o. Loss Reserves less the Previously accounted Loss Participation Amount i.r.o. Loss Reserves

The Result of the calculation is booked with the Entry Codes defined for the system parameter Entry Code Usage/Calculation Loss Participation i.r.o Paid. Losses and Loss Participation i.r.o Reserves. Which Entry Codes are selected for the calculations is decided by your System Administrator.

Example;

Conditions;

Loss Participation table;

Bookings on RP Business Ledger;

*) Entry code in Entry Code Sub Category Original Premium Reserve/Original Loss Reserve.

**) Loss Ratio; (245.000 + 12.109) / (-350.000 + 8.000) * 100 = 75,18% >> Min Loss Ratio 71,00% and Loss Participation 100%

***) Refer to Loss Participation - formulas last in the chapter for calculation of 3L and 3M

Calculate Loss Participation Amount

- D) when Deduct from Reserves, then Paid Losses

D.7) Loss Reserve Amount in excess of Limit;

Loss Reserve Amount less the Loss Participation Limit.

D.8)Provisional Loss Participation Amount i.r.o. Loss Reserves;

Loss Reserve Amount in excess of Limit is multiplied with the Loss Participation rate

D.9) Final Loss Participation Amount i.r.o. Loss Reserves;

If Provisional Loss Participation Amount i.r.o. Los s_Reserves_ is less than or equal to the _Max Loss Participation Amount_, then the _Final Loss Participation Amount i.r.o. Loss Reserves_ is set to the _Provisional Loss Participation Amount i.r.o Los_ s_Reserve._

If Provisional Loss Participation Amount i.r.o. Loss Reserves is greater than the Max Loss Participation Amount, then the Final Loss Participation Amount i.r.o. Loss Reserves is set to the Max Loss Participation Amount.

D.10) Provisional Loss Participation Amount i.r.o Paid Losses

Provisional Loss Participation Amount less Provisional Loss Participation Amount i.r.o. Loss Reserves.

D.11) Final Loss Participation Amount i.r.o. Paid Losses

Final Loss Participation Amount less Final Loss Participation Amount i.r.o. Loss Reserves.

D.12) Loss Participation Adjustment Amount i.r.o. Paid Losses

Final Loss Participation Amount i.r.o. Paid Losses less the Previously paid Loss Participation Amount i.r.o. Paid Losses

D.13) Loss Participation Adjustment Amount i.r.o. Loss Reserves

Final Loss Participation Amount i.r.o. Loss Reserves less the Previously accounted Loss Participation Amount i.r.o. Loss Reserves

The Result of the calculation is booked with the Entry Codes defined for the system parameter Entry Code Usage/Calculation Loss Participation i.r.o Paid. Losses and Loss Participation i.r.o Reserves. Which Entry Codes are selected for the calculations is decided by your System Administrator.

Example;

Conditions;

Loss Participation table;

Bookings on RP Business Ledger;

*) Entry code in Entry Code Sub Category Original Premium Reserve/Original Loss Reserves

**) Loss Ratio; (100.000 + 350.000) / (-450.000 + 50.000) * 100 = 112,5% >> Min Loss Ratio 76,00% and Loss Participation 20%

***) Refer to Loss Participation - formulas last in the chapter for calculation of 3M and 3L

Loss Participation - formulas;

Abbreviation
Loss Participation = L.P.
Loss Ratio = L.R.
Loss Ratio:
A.1 Losses/Premium * 100

Loss Participation Amount:
A.2 Premium * Min LR
A.3 Losses - A.2 (Has to be > 0, else = 0)
A.4 A.3 * LP rate
A.5 Premium * Max Pct of Premium
A.6 If A.4 <= A.5, then A.4
If A.4 > A.5, then A.5

- A) when Deduct from Loss Reserve:
A.7 If Loss Reserve < A.6, then Loss Reserve
If Loss Reserve > A.6, then A.6
A.8 A.7 - Previously accounted LP i.r.o. Loss Reserve

- B) when Deduct from Paid Losses:
B.7 If Paid Losses < A.6, then Paid Losses
If Paid Losses > A.6, then A.6
B.8 B.7 - Previously paid LP i.r.o. Paid Losses

- C) when Deduct from Paid Losses, then Reserves:
C.7 Paid Losses - A.2
C.8 C.7 * L.P. rate
C.9 If C.8 <= A.5, then C.8
If C.8 > A.5, then A.5
C.10 A.4 - C.8
C.11 A.6 - C.9
C.12 C.9 - Previously Paid L.P. i.r.o. Paid Losses
C.13 C.11 - Previously accounted L.P. i.r.o. Loss Reserves

- D) when Deduct from Reserves, then Paid Losses:
D.7 Loss Reserves - A.2
D.8 D.7 * L.P. rate
D.9 If D.8 <= A.5, then D.8
If D.8 > A.5, then A.5
D.10 A.4 - D.8
D.11 A.6 - D.9
D.12 D.11 - Previously Paid L.P. i.r.o. Paid Losses
D.13 D.9 - Previously accounted L.P. i.r.o. Loss Reserves