CAS Exam 6C Fall 2019, Question 17
Study guide: Exam 6C
The following information is available for a federally regulated property and casualty insurance company as at December 31, 2018.
Exceedance probability curves:
| Percentile | West Canada | East Canada |
|---|---|---|
| 0.995 | 30,000 | 12,000 |
| 0.996 | 75,000 | 25,000 |
| 0.998 | 350,000 | 100,000 |
| 0.999 | 600,000 | 200,000 |
Reinsurance program:
| Loss Layer | % Ceded |
|---|---|
| 100,000 xs 50,000 | 50% |
| 150,000 xs 150,000 | 100% |
The following information is also available:
- The insurance company is phasing-in to the countrywide PML 500 requirement.
- No capital market financing is used by the company.
- The total capital & surplus of the company is 400,000.
- The company will use the maximum allowed of its capital & surplus to determine the earthquake reserves.
- The Earthquake Premium Reserve (EPR) is 25,000.
Part a (2.5 points)
Calculate the earthquake reserves as at December 31, 2018.
Part b (0.5 points)
Identify two elements that earthquake exposure risk management policies and procedures should document.
Answer this question and see the worked solution
Concepts tested
- Earthquake Reserves
- Earthquake Exposure Risk Margin
- Probable Maximum Loss
- Catastrophe Exposure Management