CAS Exam 5 Fall 2017, Question 2
Study guide: Exam 5
Given the following information:
| Rate Change Effective Date | Overall Rate Change |
|---|---|
| July 1, 2013 | 5% |
| October 1, 2015 | 2% |
| October 1, 2016 | -4% |
| Calendar Year | Earned Premium ($000) | Earned Premium ($000) at Current Rate Level |
|---|---|---|
| 2014 | 15,000 | 14,775 |
| 2015 | 18,000 | 17,622 |
- 2016 Earned Premium = $22,000,000.
- 2014 through 2016 combined projected ultimate loss and LAE = $40,000,000.
- Selected annual premium trend = 2%.
- Fixed expense provision = 8%.
- Variable expense provision = 20%.
- Target underwriting profit provision = 5%.
- All policies are annual.
- Rates are to be in effect for one year.
- The rate revision is planned to be effective October 1, 2017.
Part a (1.5 points)
Calculate the projected earned premium at current rate level for 2014 through 2016.
Part b (0.5 points)
Calculate the indicated rate change.
Answer this question and see the worked solution
Concepts tested
- On Level Premium
- Premium Trend
- Overall Rate Level Indication
- Earned Premium
- Parallelogram Method
- Loss Ratio Method