A Study Note on the Actuarial Evaluation of Premium Liabilities

Several approaches have been used to estimate premium liabilities. The emphasis of these approaches has been on unearned premium and deferred policy acquisition expenses (DPAE), as such items represent the largest components of premium liabilities. The purpose of this paper is to provide a framework for the evaluation of premium liabilities and to augment he actuarial literature. We define and review the individual components of premium liabilities as well as the regulatory requirements and Canadian Institute of Actuaries recommendations and standards of practices related to premium liabilities. We also present an actuarial approach for estimating equity in the unearned premium, the premium deficiency, and DPAE. he approach here accords with Canadian Institute of Actuaries recommendations and standards of practice as well as statutory requirements as of December 31, 1997.