CAS Exam 6C Fall 2018, Question 16
Study guide: Exam 6C
The following information is available for a property and casualty insurance company's P&C-1. All amounts are in thousands of dollars ($000s).
| Page 20.10 Asset | 2017 | 2016 |
|---|---|---|
| Recoverable from Reinsurers: Unearned Premiums | n/a | 1,200 |
| Recoverable from Reinsurers: Unpaid Claims and Adjustment Expenses | A | 1,760 |
| Total Investments including cash | 30,000 | 25,000 |
| Page 20.20 Liabilities and Equity | 2017 | 2016 |
|---|---|---|
| Unearned Premiums | J | 3,000 |
| Unpaid Claims and Adjustment Expenses | B | 4,477 |
| Page 20.30 Statement of Income | 2017 | 2016 |
|---|---|---|
| Net Premium Written | 16,000 | 15,000 |
| Net Premium Earned | 15,800 | n/a |
| Gross Claims and Adjustment Expenses | C | n/a |
| Reinsurers' share of claims and adjustment expenses | D | n/a |
| Net Claims and Adjustment Expenses | E | n/a |
| Net Investment Income | 1,800 | n/a |
Page 60.41 Net Claims and Adjustment Expenses Run-Off - Discounted:
| Year | Item | 2016 | 2017 | 2017 & prior |
|---|---|---|---|---|
| 2016 | UCAE, end of year | 1,200 | ||
| IBNR, end of year | 1,517 | |||
| 2017 | Paid during year | F | n/a | n/a |
| UCAE, end of year | 900 | n/a | 2,100 | |
| IBNR, end of year | 1,159 | n/a | K | |
| Investment Income from UCAE & IBNR | G | |||
| Amount: excess (deficiency) | n/a | |||
| Ratio: excess (deficiency) | H |
| Payment Pattern | |
|---|---|
| Year 1 | 20% |
| Year 2 | 30% |
| Year 3 | 50% |
Cumulative Paid Losses:
| Accident Year | 12 | 24 |
|---|---|---|
| 2016 | 1,000 | 3,000 |
| 2017 | 1,000 |
Undiscounted Unpaid:
| Accident Year | 12 | 24 |
|---|---|---|
| 2016 | n/a | 3,000 |
| 2017 | 4,000 |
- The company purchases quota share reinsurance. The percentage retained by the company is 60%.
- Claims development margin for adverse deviation (MfAD): 15%
- Reinsurance recovery MfAD: 2%
- Investment return MfAD: 0.75%
Bond Portfolio:
| Rating | Classification | Book Value | Market Value | Duration | Yield |
|---|---|---|---|---|---|
| Government | Held to Maturity | 2,000 | 1,000 | 0.8 | 1.0% |
| AAA | Held to Maturity | 8,000 | 8,000 | 10.0 | 2.0% |
| A | Held to Maturity | 15,000 | 17,000 | 3.0 | 3.0% |
| Common Shares | 5,000 | 10.0% |
Calculate A, B, C, D, E, F, G, H, J, and K. (Note that there is no letter I.)
Part a (4.75 points)
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