CAS Exam 5 Fall 2017, Question 7
Study guide: Exam 5
Given the following information for the past year for an insurance company:
| Item | ($000) | % Fixed |
|---|---|---|
| Written Premium | 25,000 | — |
| Earned Premium | 20,000 | — |
| Agent Commission | 3,000 | 0% |
| Other Acquisition Cost | 300 | 100% |
| Premium Tax & Licensing Fees | 1,000 | 0% |
| General Expense | 2,500 | 100% |
| Loss Adjustment Expenses | 1,200 | 0% |
- Underwriting profit provision = 5%.
Part a (0.75 points)
Calculate the underwriting expense ratio using the premium-based projection method.
Part b (0.25 points)
Calculate the operating expense ratio using the premium-based projection method.
Part c (0.25 points)
Calculate the total permissible loss ratio.
Part d (0.75 points)
Calculate the indicated rate change using a projected loss ratio of 65% (excluding loss adjustment expenses).
Answer this question and see the worked solution