Clark

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  1. Types of Proportional Insurance
    • 1. Quota Share
    • 2. Surplus Share
    • 3. Fixed and Variable Quota Share Arrangments on Excess Business (commercial umbrella policies)
  2. Steps in the Pricing Analysis for Proportional Treaties
    • 1. Compile historical experience on treaty
    • 2. Exclude catastrophe and shock losses
    • 3. Adjust experience to ultimate level and project to future periods
    • 4. Select expected non-catastrophe loss ratio for treaty
    • 5. Load expected non-catastrophe loss ratio for catastrophes
    • 6. Estimate combined ratio given ceding commission and other expenses
    • 7. Evaluate the projected combined ratio
  3. 3 Special Features of Proportional Treaties
    • 1. Sliding scale commission: % of premium paid to ceding company "slides" with actual experience
    • 2. Profi t commission: Subtracts the actual loss ratio, ceding commission and a "margin" for expenses from the treaty premium and returns a % of this as additional commission
    • 3. Loss Corridors: Ceding company assumes some portion of the reinsurer's liability if the loss ratio exceeds a certain amount
  4. Steps of Experience Rating Proportional Treaties
    • 1. Gather subject premium and historical losses for as many years as possible
    • 2. Adjust subject premium to future level using rate, price, and exposure inflation factors
    • 3. Apply loss inflation to historical large losses and determine amount included in layer being analyzed
    • 4. Apply excess development factors to summed losses for each period
    • 5. Divide trended and developed layer losses by adjusted subject premium
  5. Free Cover
    • 1. Experience rating in which no losses trend into highest portion of layer being priced
    • 2. Use experience rating for lower part of layer and relativities in the exposure rating to project the higher layer
  6. 3 Categories of Casualty Per Occurrence Excess Treaties
    • 1. Working Layer - low layer attachment which is expected to be penetrated several times
    • 2. Exposed Excess - attaches below some policy limits but penetrated less frequently
    • 3. Class Covers - high attachment; single policy loss will not penetrate layer
  7. Steps of Experience Rating Casualty Per Occurrence Excess Treaties
    • 1. Gather subject premium and historical losses for as many years as possible
    • 2. Adjust subject premium to future level using rate, price and exposure inflation factors
    • 3. Apply loss severity trend to individual historical losses and cap at applicable policy limit
    • 4. Apply excess development factors to summed losses for each period
    • 5. Divide trended and developed layer losses by adjusted subject premium for each historical year
  8. Exposure Factor for Umbrella Policies
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  9. Exposure Factor for Umbrella with ALAE included in Loss
    • Exposure Factor = [E(x; min(PL, (AP + Lim)/(1 + e))) -E(x; min(PL, AP/(1 + e)))] / E(x; PL)
    • where
    • a) PL = Policy Limit on Umbrella
    • b) AP = Treaty attachment point
    • c) Lim = Treaty Limit
    • d) e = ALAE as % of loss Capped at PL
Author:
Esaie
ID:
26156
Card Set:
Clark
Updated:
2010-07-09 17:32:46
Tags:
Exam6
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