The calculation of insurance reserves using generalized actuarial basis

The issue of insurance reserves, its fulfillment and connection with actuarial basis of tariffing is considered. Insufficient validity of the current insurance reserve system is noted. The concept of the generalized actuarial basis, which is unified for life insurance and non-life insurance, is studied. The unified structure for both areas of insurance is offered. The structure consists of two reserves: reserve for upcoming payments and reserve for upcoming expenses. The paper gives the definitions of the mentioned reserves, which unlike the known definitions offer a particular rule of defining the amount of reserves, based on the amount of insurer’s security assurances. The principles of calculation for both reserves, based on the information from the generalized actuarial basis, are suggested. Insurance reserves are calculated for every insurance agreement on any date through interpolation of the relative reserve (per individual insurance premium) between two basic dates — interpolation nodes. Basic interpolation points are calculated through the statistical modeling. Approbation of the insurance reserve calculations is made for typical insurance risk in common insurance. The advantages of the results obtained with the proposed principles, compared with the results obtained with the current official principles, are demonstrated. Particularly, unlike the current principles, the reserves for upcoming payments and upcoming expenses accurately consider the conditions of actuarial basis and provide such a dynamic of insurance reserves, which complies to the prospective distribution of insurer’s expenses in time. As a result, the meanings of the reserves can be explained and verified on any date. So, the suggested principles are better complied to actuarial basis than the current official principles.