CAS Exam 8 Fall 2013, Question 14
Study guide: Exam 8
A policy subject to a balanced retrospective rating plan is written with the following values:
- Expected loss ratio = 70% of standard premium
- Tax multiplier = 1.10
- Expense ratio = 20%
- Loss conversion factor = 1.125
- Maximum retrospective premium = 125% of standard premium
- Minimum retrospective premium = 75% of standard premium
The appropriate values from Table M for the current year are as follows:
- Insurance charge at entry ratio associated with maximum = 0.653
- Insurance savings at entry ratio associated with minimum = 0.031
Calculate the expected retrospective premium as a percentage of standard premium for the policy.
Part a (1.5 points)
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