Expense Overrun Provision

For a young company in the insurance market, if the management expenses are projected to be as below:



Y1: 1,500

Y2: 2,000

Y3: 2,500

Y4: 3,000

Y5: 3,500



However, the expenses allowance based on the volume of the business written are as below:



Y1: 500

Y2: 1,000

Y3: 1,500

Y4: 2,000

Y5: 3,000



If I am required to set up an expense overrun provision on top of the GPV reserves, what is the methodology available?



I understand from the "Best Estimate Assumptions for Expenses" (from CIA) that the expense overrun provision should be based on the present value of the future expense overrun. If that is the case, the expense overrun to be set up as at the valuation date is 4,500 (if interest rate = 0). Will it be too heavy as the expense overrun provision if expense reserve required is only 3,500?



Appreciated if anyone can give any feeback, share the experience or any reference.

Expense Overrun Provision