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IAI Actuarial Core Principles · Actuarial Mathematics for Modelling · Death strain at risk, expected and actual death strain, mortality profit

In the actuarial notation used for reserving, the death strain at risk (DSAR) for a policy in year t is defined as the sum assured payable on death in the year less the reserve held at the end of that year. For a policy with sum assured Rs 5,00,000 payable at the end of the year of death, and year-end reserve Rs 1,20,000 if the life survives or dies, what is the DSAR?

The death strain at risk is the sum assured minus the year-end reserve, because the reserve is released on death. Here it is 5,00,000 minus 1,20,000, which equals Rs 3,80,000. Adding the reserve or ignoring it gives wrong figures.

  1. ARs 3,80,000Correct
  2. BRs 6,20,000
  3. CRs 5,00,000
  4. DRs 1,20,000
  5. Rs 4,40,000

Explanation

DSAR = S - V(end of year) = 5,00,000 - 1,20,000 = 3,80,000. Rs 6,20,000 wrongly adds the reserve; Rs 5,00,000 ignores the reserve release.

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