4 - NAIC IRIS Ratios

Question 1

IRIS Ratio 1 - Gross Premiums Written to Policyholders’ Surplus

Answer 1

100* (Direct Premiums Written + Reinsurance Assumed - Affiliates + Reinsurance Assumed - Non-Affiliates) / Policyholders’ Surplus

Question 2

IRIS Ratio 2 - Net Premiums Written to Policyholders’ Surplus

Answer 2

100 * Net Premiums Written / Policyholders’ Surplus

Question 3

IRIS Ratio 3 - Change in Net Premiums Written

Answer 3

100 * (Net WP Current Year - Net WP Prior Year) / Net WP Prior Year

Question 4

IRIS Ratio 4 - Surplus Aid to Policyholders’ Surplus

Answer 4

(((Reinsurance Ceded Commissions + Reinsurance Ceded Contingent Commissions) / (Reinsurance Premiums Ceded - Affiliates + Reinsurance Premiums Ceded - Non-Affiliates)) * (Sum of Unearned Premiums)) / Policyholders’ Surplus

Question 5

IRIS Ratio 5 - Two-Year Overall Operating Ratio

Answer 5

100 * (Losses, LAE & Policyholder Dividends for Current & Prior Year / Premiums Earned for Current and Prior Year) + 100 * (Other Underwriting Expenses for Current and Prior Year - Total Other Income for Current and Prior Year) / (Net Premiums Written for Current and Prior Year) - 100 * (Investment Income Earned for Current and Prior Year / Premiums Earned for Current and Prior Year)

Question 6

IRIS Ratio 6 - Investment Yield

Answer 6

200 * Net Investment Income Earned / (Total Cash and Invested Assets for Current and Prior Year + Investment Inc. Due & Accrd Current and Prior Year - Borrowed Money Current and Prior Year - Net Investment Income Earned)

Question 7

What is the usual range for the IRIS Ratio 6 - Investment Yield?

Answer 7

Greater than 2.0 percent and less than 5.5 percent

Question 8

IRIS Ratio 7 - Gross Change in Policyholders’ Surplus

Answer 8

100 * (Policyholders’ Surplus Current Year - Policyholders’ Surplus Prior Year) / (Policyholders’ Surplus Prior Year)

Question 9

What is the usual range for IRIS Ratio 7 - Gross Change in Policyholders’ Surplus?

Answer 9

Less than 50 percent and greater than -10 percent

Question 10

IRIS Ratio 8 - Change in Adjusted Policyholders’ Surplus

Answer 10

((Policyholders’ Surplus Current Year - Change in Surplus Notes - Change in Paid-in or Transferred - Surplus Paid-in or Transferred - Policyholders’ Surplus Prior Year) / ABS(Policyholders’ Surplus Prior Year)) * 100

Question 11

What is the usual range for IRIS Ratio 8 - Change in Adjusted Policyholders’ Surplus?

Answer 11

Less than 25 percent and greater than -10 percent

Question 12

What factors may contribute to increases or decreases in policyholders’ surplus?

Answer 12

*Net income
*Net unrealized capital gains or losses
*Changes in nonadmitted assets
*Changes in provision for reinsurance
*Cumulative effect of changes in accounting principles
*Dividends to stockholders
*Changes in treasury stock
*Other gains or losses

Question 13

IRIS Ratio 9 - Adjusted Liabilities to Liquid Assets

Answer 13

100 * (Total Liabilities - Liabilities Equal to Deferred Agents’ Balances) / (Bonds, Stocks, Cash, Cash Equivalents & Short Term Investments, Receivable for Securities, Investment Income Due & Accrued - Investments in Parent, Subsidiaries & Affiliates)

Question 14

What is the usual range for IRIS Ratio 9 - Adjusted Liabilities to Liquid Assets?

Answer 14

Below 100 percent

Question 15

IRIS Ratio 10 - Gross Agents’ Balances (in collection) to Policyholders’ Surplus

Answer 15

100 * Gross Agents’ Balances in the Course of Collection / Policyholders’ Surplus

Question 16

What is the usual range for IRIS Ratio 10 - Gross Agents’ Balances (in collection) to Policyholders’ Surplus?

Answer 16

Less than 40 percent

Question 17

IRIS Ratio 11 - One-Year Reserve Development to Policyholders’ Surplus

Answer 17

100 * (One-Year Loss Reserve Development / Policyholders’ Surplus Prior Year)

Question 18

What is the usual range for IRIS Ratio 11 - One-Year Reserve Development to Policyholders’ Surplus?

Answer 18

Less than 20 percent

Question 19

IRIS Ratio 12 - Two-Year Reserve Development to Policyholders’ Surplus

Answer 19

100 * Two-Year Loss Reserve Development / Policyholders’ Surplus of Second Prior Year

Question 20

What is the usual range for IRIS Ratio 12 - Two-Year Reserve Development to Policyholders’ Surplus?

Answer 20

Less than 20 percent

Question 21

What could cause adverse ratio results for IRIS Ratio 12 - Two-Year Reserve Development to Policyholders’ Surplus?

Answer 21

*Strengthening of deficient loss and LAE reserves held at the end of the second prior year-end
*Write-off of paid and unpaid losses for uncollectible reinsurance
*Commutation of ceded reinsurance
*Change in tabular reserve discounts

Question 22

IRIS Ratio 13 - Est. Current Reserve Deficiency to Policyholders’ Surplus

Answer 22

(Premiums Earned Current Year * Avg Ratio of Reserves to Premiums - Loss & LAE Reserves Current Year) / Policyholders’ Surplus
The Avg Ratio of Reserves to Premiums (Preliminary Ratio) is long - see printed sheet

Question 23

What is the usual range for IRIS Ratio 13 - Est. Current Reserve Deficiency to Policyholders’ Surplus?

Answer 23

Less than 25 percent

Question 24

What is the usual range for IRIS Ratio 1 - Gross Premiums Written to Policyholders’ Surplus?

Answer 24

Results up to 900 percent

Question 25

What is the usual range for IRIS Ratio 2 - Net Premiums Written to Policyholders’ Surplus?

Answer 25

Results up to 300 percent

Question 26

What is the usual range for IRIS Ratio 3 - Change in Net Premiums Written?

Answer 26

-33 percent to 33 percent

Question 27

What is the usual range for IRIS Ratio 4 - Surplus Aid to Policyholders’ Surplus?

Answer 27

Less than 15 percent

Question 28

What is the usual range for

Question 29

What is the usual range for IRIS Ratio 5 - Two-Year Overall Operating Ratio?

Answer 29

Less than 100 percent