FAM: A prospective reserve is a value at a specified time
A reserve compares future benefit and expense cash flows with future premium cash flows on a stated basis. It is not the total premiums already collected. Before calculating, mark which cash flows remain and whether an immediate premium is included.
Worked example or practice scenario
In a deliberately deterministic two-period example, a benefit of 1,100 is due one year from the valuation time and a premium of 300 is due immediately. At 10% interest, the reserve immediately before that premium is 1,100/1.10−300 = 700. Immediately after it, the reserve is 1,000.
Try this next
Add a survival condition and show where its probability enters. State the valuation basis and whether expenses are included. An answer of 700 or 1,000 can be correct only when its timing is clearly defined.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.