CAS Exam 9 Spring 2018, Question 18
Study guide: Exam 9
Given the following table:
| Company | Proposed Premium | Expected Loss and Expense | Premium-to-Surplus Ratio |
|---|---|---|---|
| A | 105 | 94 | 2:1 |
| B | 105 | 94 | 1:1 |
| C | 98 | 94 | 3:1 |
Each company writes the same coverage, in the same market, and provides the same level of coverage.
Part a (0.75 points)
The regulator has determined that a 15% return on surplus is the appropriate benchmark for excessive profitability. Identify any companies whose proposed premium will be rejected by the regulator.
Part b (0.5 points)
Describe two disadvantages of the return-on-equity method compared to the return-on-sales method.
No current syllabus covers this question; it is kept for the record.
Answer this question and see the worked solution