Exam 9 Practice Question 2
Study guide: Exam 9
An actuary is setting homeowners rates in a hurricane-exposed state. The five-year experience period contains one major hurricane. The actuary has the following:
- Non-hurricane pure premium (including LAE), already developed to ultimate and trended to the future policy period: $410 per exposure
- Average hurricane pure premium in the experience period, actual losses: $210 per exposure
- Hurricane catastrophe model expected annual loss for the current book, already at the future policy period's cost level: $85 per exposure
- The combined loss development and trend factor used on the non-hurricane losses: 1.15
- Fixed expense: $40 per exposure
- Variable expense: 20% of premium
- Underwriting profit provision: 5% of premium
Calculate the indicated average rate per exposure.
- A) $600.00
- B) $700.00
- C) $713.33
- D) $730.33
- E) $880.00
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