Calculate Portfolio of Reserve

If you want the SICS to calculate Portfolio based on predefined reserve entry codes and if you want the system to reverse the Reserve on the current Insured Period and to rebook the Reserve into the next open Insured Period, the condition must be defined. Refer to the chapter Handle Portfolio of Reserve Calculation Conditions. Conditions on the Retrocessionaire Participation can be inherited from the Outward Cedent’s Contract or vary per Retrocessionaire’s (special Portfolio Calculation of Reserve condition).

Portfolio of Reserve, if defined, is calculated and booked when you run the last Account of the Insured Period (Refer to Administration condition).

The Portfolio of Reserve can be calculated in two ways:

• Only when there is a change in the Share condition from one Insured Period to the next Insured Period or
• Independent of a change in the Share condition.

Refer to the field Portfolio Withdrawal/Entry only when change in Share on Portfolio Calculation Reserves (PO) condition.

To have the Portfolio of Reserve calculated, the field Portfolio as Reserve in Items Included on the Retrocession Calculation order must beselected.

Note! If the field Portfolio as Reserve in Items Included on the Retrocession Calculation is selected, the reserves in the Entry Code Sub Categories Original Loss Reserve and Original Premium Reserve will be proportionally booked on the RP Business Ledger irrespective of the Reserve (RS) condition is defined or not.

The basis for the Reserve and the Portfolio calculations are the reserves booked on the OCC as Booking Business Ledger for the Insured Period to be closed. The Portfolio of Reserve can be calculated using different Reserve bases defined on the Portfolio Calculation Reserves condition.
The Portfolio of Reserve can be calculated for both the Accounting Bases Clean Cut and Run-Off. The basis for the calculation is cumulated figures for all Accounting Year/Periods for the Insured Period to be closed and older Insured Periods. The following bases are possible to define on the PO conditions:

Premium Reserves - the calculation basis is dependent on the Entry Code Group selected in this field and the percentage entered in the field Portfolio Entry/Withdrawal. (Only Entry Codes included in the selected group will be included in the calculation).

Loss Reserves - the calculation basis is dependent on the Entry Code Group selected in this field and the percentage entered in the field Portfolio Entry/Withdrawal. Maximum 5 different Entry Code Groups can be selected. (Only Entry Codes included in the selected group will be included in the calculation).

Other Reserves - the calculation basis is dependent on the Entry Code Group selected in this field and the percentage entered in the field Portfolio Entry/Withdrawal. Maximum 5 different Entry Code Groups can be selected. (Only Entry Codes included in the selected group will be included in the calculation).

Calculations; (The below rules are common for calculation of Premium, Loss and Other Reserve/Portfolio);

Reversal of Reserve Bookings #

The basis for the reversal of the reserve details are the reserve bookings on the RP Business Ledger as Booking; All reserve bookings according to the selected Entry Code Group made in previous/current Accounts for the Insured Period to be closed will be reversed with the original Entry Codes. (The sum of the Entry Codes included in the calculation will be zero) If the RP is renewed to the next Insured Period a rebooking of the reserves into the next Insured Period will be made, see below.

Rebooking of the Reserves #

The basis for the rebooking of the reserve details are the reserve bookings on the OCC as Booking business ledger for the Insured Period to be closed (IP X). Each of the reserve details is multiplied with the Retrocessionaire’s Share participating in the next open Insured Period (IP X+1). Reserve details which are rebooked in the IP X+1 are according to the selected Entry Code Group in IP X+1.

Formula;
Reserve OCC as Booking Business Ledger on IP X * RP Share% IP X+1

Example:

Conditions;
Entry Code Group selected on condition = Group1
Group1 includes Entry Codes; 3A, 3B and 3C
RP1 - Share; IP X = 25% and IP X+1 = 20%
The following reserve details are made on the Business Ledger OCC/RP as Booking for IP X_;_

The following bookings will be made on the RP1 when running the Retrocession Calculation order for the last Account of the IP X;

*) Note that this Entry Code is not included in the selected Entry Code Group and will therefore not be reversed/rebooked.
**) The bookings are reversed on IPX. Sum of the reserve details for the Entry Codes included in the Entry Code Group1 is now 0,00.
***) The bookings are rebooked on IPX+1 adjusted with the Share for IPX+1.

Booking of Portfolio Withdrawal/Entry #

Portfolio Withdrawal/Entry only when change in shareis selected. If the RP Share is reduced in the next open Insured Period X+1 or participation is ended IP X, a Portfolio Withdrawal will be booked on the current Insured Period X for the changed Share %. All bookings on the business Ledger OCC as Booking which are made with an Entry Code included in the selected Entry Code Group are basis for the portfolio calculation. All bookings mean cumulated details for the Insured Period to be closed and also older Insured Period according to the Portfolio Calculate Reserve condition. The result of the calculation is booked with the corresponding Entry Code defined in the system parameter Entry Code Usage, Calculation Portfolio Loss Reserve Withdrawal, Portfolio Loss Reserve Withdrawal 2, Portfolio Premium Reserve Withdrawal etc as for the Entry Code Group number selected on the Portfolio Calculate Reserves condition.

Formula Portfolio Withdrawal;
Reserve OCC as Booking Business Ledger on IP X * (RP Share% IP X - RP Share% IP X+1) * Portfolio Withdrawal % IP X.

If the RP’s Share is increased or a new RP is entered into the next open Insured Period X+1, a Portfolio Entry will be booked on the IP X+1 for the changed Share %. All bookings on the business Ledger OCC as Booking which are made with an Entry Code included in the selected Entry Code Group are basis for the portfolio calculation. All bookings mean cumulated details for the Insured Period to be closed and also older Insured Period according to the Portfolio Calculate Reserve condition. The result of the calculation is booked with the corresponding Entry Code defined in the system parameter Entry Code Usage, Calculation Portfolio Loss Reserve Entry, Portfolio Loss Reserve Entry 2, Portfolio Premium Reserve Entry etc. as for the Entry Code Group number selected on the Portfolio Calculate Reserves condition.

Formula Portfolio Entry;
Reserve OCC as Booking Business Ledger on IP X * (RP Share% IP X - RP Share% IP X+1) * Portfolio Entry % IP X+1

Example:
Reserve amount booked on OCC A as Booking Business Ledger for IP X = 1.000
Portfolio Withdrawal on PO conditions for IP X = 60%
Portfolio Entry on PO conditions for IP X+1 = 50%

RP1; 1.000 * (25% - 20%) * 60% = 30 (Portfolio Withdrawal)
RP2; 1.000 * (25% - 30%) * 50% = -25 (Portfolio Entry)
RP3; 1.000 * (25% - 25%) * 60% = 0 (no Portfolio)
RP4; 1.000 * (25% - 0%) * 60% = 150 (Portfolio Withdrawal)
RP5; 1.000 * ( 0% - 25%) * 50% = -125 (Portfolio Entry)

Portfolio Withdrawal/Entry only when change in shareis NOT selected. A Portfolio Withdrawal on the current Insured Period X and a Portfolio Entry on the next open Insured Period X+ 1 will be booked if the Retrocessionaire is renewed to the next Insured Period. If the Retrocessionaire is not renewed only a Portfolio Withdrawal will be booked. For new Retrocessionaires a Portfolio Entry on the next Insured Period will be booked. All bookings on the business Ledger OCC as Booking which are made with an Entry Code included in the selected Entry Code Group are basis for the portfolio calculation. All bookings mean cumulated details for the Insured Period to be closed and also older Insured Period according to the Portfolio Calculate Reserve condition.

Portfolio Withdrawal; The basis will be multiplied with the RPs share IP X multiplied with the Portfolio Withdrawal % IP X. The result of the calculation is booked with the Entry Code defined in the system parameter Entry Code Usage, Calculation Portfolio Loss/Premium/Other Reserve Withdrawal. The Portfolio Withdrawal amount(s) will be booked with corresponding Entry Code(s) as for the Entry Code Group(s) defined on the Portfolio Calculate Reserve (PO) condition.

Formula;
Reserve OCC as Booking Business Ledger on IP X * RP Share% IP X *
Portfolio Withdrawal % IP X

Portfolio Entry; The same basis as for Portfolio Withdrawal will be used to calculate the Portfolio Entry; Basis multiplied with RP Share IP X+1 multiplied with Portfolio Entry % IP X+1. The Result will be booked with the Entry Code defined in the system parameter Entry Code Usage, Calculation Portfolio Loss/Premium/Other Reserve Entry. The Portfolio Entry amount(s) will be booked with corresponding Entry Code(s) as for the Entry Code Group(s) defined on the Portfolio Calculate Reserve (PO) condition

Formula Portfolio Entry;
Reserve OCC as Booking Business Ledger IP X * RP Share% IP X+1 *
Portfolio Entry % IP X+1 * -1.

Example:
Reserve amount booked on OCC A as Booking Business Ledger for IP X = 1.000
Portfolio Withdrawal on PO conditions for IP X = 60%
Portfolio Entry on PO conditions for IP X+1 = 50%

RP1; 1.000 * 25% * 60% = 150 (Portfolio Withdrawal IP X)
RP1; 1.000 * 20% * 50% * -1 = -100 (Portfolio Entry IP X+1)
RP2; 1.000 * 25% * 60% = 150 (Portfolio Withdrawal IP X)
RP2; 1.000 * 30% * 50% * -1 = -150 (Portfolio Entry IP X+1)
RP3; 1.000 * 25% * 60% = 150 (Portfolio Withdrawal IP X)
RP3; 1.000 * 25% * 50% * -1 = -125 (Portfolio Entry IP X+1)
RP4; 1.000 * 25% * 60% = 150 (Portfolio Withdrawal IP X)
RP5; 1.000 * 25% * 50% * -1 = -125 (Portfolio Entry IP X+1)

Calculate Portfolio Withdrawal when Business is Commuted #

If you want the SICS to calculate Portfolio Withdrawal when business is commuted, the condition must be defined. Refer to the chapter Handle Business Life Span, Record information when Business is to be Commuted. Portfolio Withdrawal can be calculated of predefined Entry Code Groups for Premium Reserve, Loss Reserve and Other Reserve. Portfolio Withdrawal can be calculated based on one group for Premium and maximum 5 different groups for Loss and Other Reserve. Refer to Portfolio Calculate Reserve condition_, Commutation_ tab. The Commutation condition is special condition for the Retrocessionaire. Portfolio Withdrawal of Reserve will be calculated when you run the Account equal to the Account selected in the field _Commute per_ in _Business to be Commuted_ on Partner tab of the Retrocessionaire. In addition to the booking of the Portfolio Withdrawal a reversal of the reserve bookings included in the selected Entry Code Group(s) will be made. The Portfolio Withdrawal calculation will be performed for businesses with Accounting Basis _Run-off_ only.

An adjustment of the Portfolio Withdrawal can be calculated after a period, if agreed. Refer to field Portfolio Adj per in Business to be Commuted on Partner tab of the Retrocessionaire. The Portfolio Withdrawal Adjustment can be calculated based on Adjustment of Portfolio Groups in addition to the Entry Code Group selected for the Portfolio Withdrawal calculation. Refer to Portfolio Calculate Reserve condition_, Commutation_ tab.

To have the Portfolio of Reserve booked, the field Portfolio as Reserve in Items Included on the Retrocession Calculation order must beselected.

Note! If the field Portfolio as Reserve in Items Included on the Retrocession Calculation is selected, the reserves in the Entry Code Sub Categories Original Loss Reserve and Original Premium Reserve will be proportionally booked on the RP Business Ledger irrespective of the Reserve (RS) condition is defined or not.

The basis for the reversal of the Reserve and the Portfolio Withdrawal calculations are the reserves booked on the OCC as Booking Business Ledger for the Insured Period to be commuted. The Portfolio Withdrawal can be calculated using different Reserve bases defined on the Portfolio Calculation Reserves condition, Commutation tab.

The basis for the calculation is cumulated figures for all Accounting Year/Periods for the Insured Period to be commuted and older Insured Periods. The following bases are possible to define on the PO condition, Commutation tab:

Premium Reserves - the calculation basis is dependent on the Entry Code Group selected in the field Premium Reserve Group and the percentage entered in the field Commutation%. (Only Entry Codes included in the selected group will be included in the calculation).

Loss Reserves - the calculation basis is dependent on the Entry Code Group selected in the field Loss Reserve Group and the percentage entered in the field Commutation%. Maximum 5 different Entry Code Groups can be selected. (Only Entry Codes included in the selected group(s) will be included in the calculation).

Other Reserves - the calculation basis is dependent on the Entry Code Group selected in the field Other Reserve Group and the percentage entered in the field Commutation%. Maximum 5 different Entry Code Groups can be selected. (Only Entry Codes included in the selected group will be included in the calculation).

Reversal of Reserve Bookings when Business Commuted #

The basis for the reversal of the reserve details are the reserve bookings on the RP Business Ledger as Booking; All reserve bookings according to the selected Entry Code Group made in previous/current Accounts for the Insured Period to be Commuted will be reversed with the original Entry Codes. If the RP is renewed to the next Insured Period no rebooking of the reserves into the next Insured Period will be made.

Portfolio Withdrawal Bookings when Business Commuted #

A PortfolioWithdrawal will be booked for the Insured Period to be commuted (IP X). If the Retrocessionaire is renewed to the next Insured Period, no Portfolio Entry will be booked. All bookings on the business Ledger OCC as Booking which are made with an Entry Code included in the selected Entry Code Group are basis for the portfolio calculation. All bookings mean cumulated details for the Insured Period to be commuted and also older Insured Period according to the Portfolio Calculate Reserve condition, Commutation tab.

Portfolio Withdrawal; The basis will be multiplied with the RPs share IP X multiplied with the Commutation % IP X. The result of the calculation is booked with the Entry Code defined in the system parameter Entry Code Usage, Calculation Portfolio Loss/Premium/Other Reserve Withdrawal. The Portfolio Withdrawal amount(s) will be booked with corresponding Entry Code(s) as for the Entry Code Group(s) defined on the Portfolio Calculate Reserve (PO) condition, Commutation tab.

Formula;
Reserve OCC as Booking Business Ledger IP X * RP Share% IP X *
Commutation % IP X

No further bookings will be made to the Insured Period being commuted until the Portfolio Withdrawal are adjusted, if agreed.

Example:
Conditions;
Entry Code Group selected on condition = Loss Reserve Group1
Loss Reserve Group1 includes Entry Codes; 3A, 3B and 3C
Commutation % = 110
IP X = Commuted per 2006, 2^nd Half-Year
RP1 Share; IP X = 25% and IP X+1 = 20%
IP X = Last Accounting Year 2010
Entry Code PLW1 = Entry Code defined for Calculation Portfolio Loss Reserve Withdrawal
The following reserve details are made on the Business Ledger OCC/RP as Booking for IP X_;_

The following bookings will be made on the RP1 when running the Retrocession Calculation order for the Account 2^nd of 2, 2006, IP X;

) Note that this Entry Code is not included in the selected Entry Code Group and will therefore not be reversed/included in the portfolio calculation.
) The bookings are reversed on IPX. Sum of the reserve details for the Entry Codes included in the Entry Code Group1 is now 0,00.
_) Portfolio Withdrawal; (200 + 300 + 500) * 25% * 110%_

Portfolio Withdrawal Adjustment Bookings when Business Commuted #

An adjustment of the PortfolioWithdrawal previously booked will be calculated, if defined. Refer to the field Portfolio Adj per in Business to be Commuted on Partner tab of the Retrocessionaire. The Adjustment of Portfolio Withdrawal will be performed when running the Retrocession Calculation order for the Account equal to the Account selected in the field Portfolio Adj per.

The basis for the Adjustment of the Portfolio Withdrawal is:

• All bookings on the Business Ledger OCC as Booking which are made with an Entry Code included in the selected Premium/Loss/Other Reserve Group and if defined
• All bookings on the Business Ledger OCC as Booking made with Entry Codes included in the selected Adjustment of Portfolio Group. As regards the Adjustment of Portfolio Group, only bookings made with an Accounting Year/Period higher than the Accounting Year/Period selected in field Commute per and with Accounting Year/Period up to and including the Accounting Year/Period selected in the field Portfolio Adj per for the Insured Period will be included in the calculation.. Portfolio Withdrawal Adjustment; The basis will be multiplied with the RPs share IP X multiplied with the Commutation % IP X. The Portfolio Withdrawal previously booked on the RP Business Ledger as Booking will be reversed and the new Portfolio Amount will be booked. The result of the calculation is booked with the Entry Code defined in the system parameter Entry Code Usage, Calculation Portfolio Loss/Premium/Other Reserve Withdrawal. The Portfolio Withdrawal amount(s) will be booked with corresponding Entry Code(s) as for the Entry Code Group(s) defined on the Portfolio Calculate Reserve (PO) condition, Commutation tab.

Formula;
(Reserve OCC as Booking Business Ledger on IP X * RP Share% IP X *
Commutation % IP X) + (Adjustment of Portfolio OCC as Booking Business Ledger on IP X * RP Share% IPX * Commutation% IP X)

No further bookings will be made to the Insured Period being commuted.

Example:
Conditions;
Entry Code Group selected on condition = Loss Reserve Group1
Loss Reserve Group1 includes Entry Codes; 3A, 3B and 3C
Adjustment of Portfolio Group = Loss Adj Group1
Loss Adj Group1 includes Entry Code 30
Commutation % = 110

IP X = Commuted per 2006, 2^nd Half-Year
IP X = Portfolio Adj per 2008, 2^ndHalf-Year
RP1 Share; IP X = 25% and IP X+1 = 20%
IP X = Last Accounting Year = 2010
Entry Code PLW1 = Entry Code defined for Calculation Portfolio Loss Reserve Withdrawal
The following reserve details were made on the Business Ledger OCC/RP as Booking for IP X, 2^nd of 2, 2006 and previous Accounts

The following bookings were made to the OCC in Accounting Year/Periods higher than Accounting Year/Period 2^nd of 2, 2006;

Portfolio Adjustment;
The following bookings will be made to RP1 when running the Retrocession Calculation order for the Account 2^nd of 2, 2008;

*) Reversal of Portfolio Withdrawal previously booked due to commutation.
**) New Portfolio Withdrawal amount due to adjustment;
(200+300+500-100+50-150+100) * 25% * 110%