CAS Exam 6C Fall 2015, Question 7
Study guide: Exam 6C
The following information is provided for the risk-sharing pool in Nova Scotia. All amounts are in thousands ($000s).
| Company A | Province Total | |
|---|---|---|
| Direct earned exposures (car years) not ceded to the pool | 150 | 1,000 |
| Direct earned exposures (car years) ceded to the pool | 20 | 500 |
| Total Direct earned exposures (car years) | 170 | 1,500 |
| Premium of non-ceded risks | 500 | 1,000 |
| Premium of ceded risks | 50 | 750 |
| Total Premium | 550 | 1,750 |
| Incurred losses for non-ceded risks | 300 | 1,000 |
| Incurred losses for ceded risks | 40 | 1,000 |
| Total Incurred losses | 340 | 2,000 |
- Expense allowance for the pool in this province is 25%.
- Company A exclusively writes automobile insurance in Nova Scotia.
- Company A is below the risk-sharing pool maximum total allowable transfer limit.
Part a (1.25 points)
Calculate the loss ratio for Company A on their share of the risk-sharing pool.
Part b (0.75 points)
Calculate the total loss ratio for Company A which includes the results of the risk-sharing pool.
Part c (1 point)
Calculate the revised total loss ratio for Company A if they choose not to cede any risks to the risk-sharing pool.
Part d (0.5 points)
Propose how the company can use the risk-sharing pool to lower its total loss ratio.
Answer this question and see the worked solution