The examiner’s report shows losses discounted to time 0 and says:
Common errors included:
• bringing all values to t = 1 when it should be t = 0
Why is this an error? The Goldfarb paper says,
The loss payments are discounted to the end of the first year, to mirror a simplifying assumption that all outstanding losses are paid, on a discounted basis, at the end of the year.
Recall that the present value, or discounted, loss ratio reflects the value of the losses at the end of the year