CAS Exam 6C Fall 2017, Question 15
Study guide: Exam 6C
The following information is available for the valuation of premium liabilities as at December 31, 2016. All amounts are in thousands of dollars ($000s).
| Item | Value |
|---|---|
| Net unearned premium booked | 55,000 |
| Gross unearned premium booked | 60,000 |
| Expected reinsurance costs | 6,000 |
| Net undiscounted loss ratio | 98% |
| Expected ULAE | 2,500 |
| Discount rate | 3% |
| MfAD for claims development | 10% |
| MfAD for reinsurance ceded | 1% |
| MfAD for investment return rates | 0.5% |
| Gross present value of losses and ULAE | 53,000 |
| Maintenance expense as a % of gross premium | 3% |
| Unearned reinsurance commissions | 2,300 |
Cumulative accident year payment pattern:
| Age (Months) | % Paid |
|---|---|
| 12 | 30% |
| 24 | 100% |
Calculate the premium deficiency, if any.
Part a (3.25 points)
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
- Margin for Adverse Deviations
- Unearned Premium
- Loss Reserve Discounting