Fackler Reserve Step Calculator
Advance a policy reserve one year with the Fackler step: accumulate reserve plus premium at interest, pay expected claims, and share the fund among survivors.
Description
Advance a policy reserve one period with premium, interest, survival, expenses, and death benefits using Fackler's recurrence.
Fackler Reserve Step helps you advance a policy reserve one period with premium, interest, survival, expenses, and death benefits using Fackler's recurrence.
Use this calculator to perform one recursive reserve step and to reconcile a sequence of policy-year cash flows. It is useful for actuarial education and for checking a larger valuation implementation one period at a time.
When to use Fackler Reserve Step
Use this calculator to perform one recursive reserve step and to reconcile a sequence of policy-year cash flows. It is useful for actuarial education and for checking a larger valuation implementation one period at a time.1
How the calculation works
Add premium to the opening reserve, accumulate with interest, subtract per-policy expenses and expected death claims, and divide the remaining fund among survivors. Repeating the step constructs a prospective-equivalent reserve path under consistent assumptions.2
V(t+1) = {[(Vt + Pt)(1+i)] − et − q(t)Bt+1} / p(t) 1Inputs and interpretation
Inputs must share a policy-year timing convention. The survival probability must be positive; death and survival probabilities should be complementary when the model has only those two exits.
Limitations and assumptions
Mixing beginning-of-year and end-of-year cash flows silently changes the result. The compact recurrence does not by itself handle multiple decrements, fractional periods, asset defaults, stochastic rates, reserve floors, or jurisdiction-specific valuation rules.
References
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Fall 2022 ILA-LFMC Model Solutions — Society of Actuaries
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Loss reserving — Wikipedia contributors
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