ALTAM: Reserve recursions are cash-flow identities with timing
A one-year recursion connects an opening reserve, premium, interest and conditional benefits to the next reserve. The exact equation depends on premium and claim timing. Define these conventions before memorising a rearrangement.
Worked example or practice scenario
For a discrete toy contract with premium P at the start, death benefit b at the end and next reserve V1 for survivors, (V0+P)(1+i)=q b+p V1. With V0=100, P=20, i=.05, q=.01, b=1,000, p=.99, V1=116/.99≈117.17.
Try this next
Check both sides numerically. Then introduce an expense paid at the start and determine which term it reduces. Do not transplant the equation into a continuous-benefit problem without re-deriving the timing.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.
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