CRVM vs Midterminal

Anyone have a quick summary of the differences and why you would want to use one vs the other?

And would you use Mean CRVM vs MidTerminal? I understand if you do that you have to do Deferred premiums for Mean CRVM but have to do Unearned premium reserve for Midterminal?


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I’ll take a stab at this, it’s been a few years since I’ve dealt with this topic. Hopefully someone else will jump in and correct any mistakes on my part. I just didn’t want to leave your question hanging. But I don’t think I fully understand the question.

CRVM is the method used to develop the terminal reserve factors. It differentiates vs. other methods (i.e. Net Level). It has nothing to do with mean vs mid-terminal reserves.

Mean Reserves = 1/2 [V(t) + V(t+1) +P]. A Deferred Premium Asset might be necessary to correct for an overstatement in the liability due to the assumption of an annual premium (i.e. if the policy is paying more frequently than annual)

Mid-Terminal Reserves = 1/2 [V(t) + V(t+1)] + 1/2 P{m} where P{m} is the modal Net Premium.

Why one instead of the other? Mean has the DPA. Mid-terminal is simpler in that regard.

Remember how much you paid for this response and treat it accordingly.

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So I asked this question to my old boss, a retired actuary who worked for a mid-terminal reporting company that later acquired (thru holding company) a few mean reporting companies. Unfortunately he said he had wondered about it, but never researched whether there was any advantage to one or the other. The mid-terminal company grew up with mostly industrial business, so its policies were predominately weekly premiums, and would have a low unearned premium reserve.
Historical reasons may be things like ease of reporting issues (that would be trivial with today’s - or even 20 years ago’s - computing power and data storage).
Today I think the question would center around how the geography of the reserve elements (Mean in 5, DPA on asset page vs Midterminal on 5 + UEP liab on liab sheet) would possibly be impacted by tax and capital requirements. Would some of your DPA be non-admitted due to relative size of DPA to other liabilities (is that a thing?). Does the 92.81% tax haircut apply differently to DPA/UEPL (another thing I haven’t had to think about in my current job)? How does deficiency reserve interact with reporting DPA/UEPL - does it shift some amount of that reserve to the non Ex 5 parts? Finally, whether or not VM-20 has any impact on this question is something I haven’t looked at either.

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