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Insurance Profitability from regulated filing perspective
- PH should earn some investment income on PH supplied funds
- Profit = P - L - E + inv inc on PH supplied funds
- P should be adjusted to account for only the portion that can be invested in marketable securities
2 advantages of using return on P as opposed to return on equity
- Easy to interpret
- Does not require the use of allocated surplus to measure expected profitability
How to set reasonable regulated rate target
Asses wheter the insurers perceive the regulated rate as reasonable by observing (1) composition of residual mkt, (2) # of insr in voluntary mkt (3) degree of product diversification and diversity and innovation
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