CAS Exam 6C Fall 2013, Question 20
Study guide: Exam 6C
The following information is available for an insurance company as at December 31, 2012.
| Line of Business | Net Unearned Premium ($000s) | Selected Undiscounted Loss Ratio | Discount Factor to Evaluation Date |
|---|---|---|---|
| Auto – Physical Damage, AB, & TPL | $30,000 | 0.95 | 0.95 |
| Personal – Property & Liability | $20,000 | 0.85 | 0.82 |
| Facility Association | $2,000 | 0.97 | 1.00 |
- Selected maintenance expense ratio = 5% of premiums
- Selected internal adjustment expense ratio = 14% of losses
- Contingent commissions = 3% of premiums
- Deferred Policy Acquisition Expenses (DPAE) ($000s) = $7,500
- Discount factor from average accident date to evaluation date = 0.98
Part a (2.75 points)
Calculate the Premium Deficiency for page 20.20 of the P&C-1.
Part b (0.75 points)
Fully explain how evaluating this company's premium deficiency by line of business could result in a different equity in unearned premium (EQUP).
No current syllabus covers this question; it is kept for the record.
Answer this question and see the worked solution
Concepts tested
- Premium Deficiency
- Deferred Policy Acquisition Expenses
- Unearned Premium
- Premium Reserve
- Facility Association
- Loss Reserve Discounting