CAS Exam 6C Spring 2016, Question 21
Study guide: Exam 6C
You are given the following information with respect to the DCAT projections of a Canadian property and casualty insurance company. All amounts are in thousands of dollars ($000s).
| Scenario 1 | Latest Year | Projection Year 1 | Projection Year 2 | Projection Year 3 | Projection Year 4 |
|---|---|---|---|---|---|
| Net Earned Premiums | 10,000 | 10,400 | 10,800 | 11,200 | 11,600 |
| Net Incurred Claims | 6,500 | 6,240 | 6,480 | 6,720 | 6,960 |
| Operating Expenses | 2,500 | 2,600 | 2,700 | 2,800 | 2,900 |
| Investment Income Net of Expenses | 2,500 | 1,000 | 1,100 | 1,200 | 1,300 |
| Income Taxes | 875 | 640 | 680 | 720 | 760 |
| Scenario 2 | Latest Year | Projection Year 1 | Projection Year 2 | Projection Year 3 | Projection Year 4 |
|---|---|---|---|---|---|
| Net Earned Premiums | 10,000 | 10,400 | 11,400 | 13,100 | 15,050 |
| Net Incurred Claims | 6,500 | 6,240 | 7,980 | 9,170 | 10,535 |
| Operating Expenses | 2,500 | 2,600 | 3,135 | 3,603 | 4,139 |
| Investment Income Net of Expenses | 2,500 | 1,000 | 1,150 | 1,300 | 1,450 |
| Income Taxes | 875 | 640 | 359 | 407 | 457 |
Part a (0.25 points)
Briefly describe which of the above scenarios is more likely to be a base scenario.
Part b (0.5 points)
Describe an event which can lead to the results shown in the adverse scenario.
Part c (1.5 points)
Identify and briefly describe three impacts on the MCT in the adverse scenario identified in part b. above.
Part d (0.5 points)
Identify two possible corrective management actions for the adverse scenario identified in part b. above.
Answer this question and see the worked solution