CAS Exam 6C Fall 2019, Question 12
Study guide: Exam 6C
Part a (0.25 points)
Briefly describe the goal of the Facility Association (FA).
Part b (0.5 points)
Briefly describe each of the following FA risk sharing mechanisms:
- i. Facility Association Residual Market
- ii. Risk Sharing Pool (RSP)
Part c (0.75 points)
Briefly describe one difference and one similarity between the two risk sharing mechanisms in part b. above.
Part d (1.25 points)
Identify the five minimum requirements that a risk must meet in order to be eligible for transfer to one of the FA RSPs.
Part e (0.5 points)
An insurance company writes private passenger automobile insurance in Ontario. The company decided to cede certain exposures to the RSP at the beginning of calendar year 2019.
| Type | Direct Business Earned | Incurred Losses |
|---|---|---|
| Policies ceded to RSP | $50 million | $100 million |
| Policies not ceded to RSP | $950 million | $600 million |
| Total | $1,000 million | $700 million |
Calculate the company's direct loss ratio net of the RSP cession.
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