A.4. Policy and Claims Data

Question 1

Definition of an exposure and an exposure base

Answer 1

Exposure - basic unit of risk underlying the insurance premium
Exposure base - what an exposure represents varied by LOB and sometimes coverage

Question 2

3 criteria for a good exposure base

Answer 2

Proportional to expected loss
Practical (objective, easy and inexpensive to obtain and verify)
Considerate of historical precedence (very costly to change due to large premium swings, IT implementations, and significant future ratemaking adjustments

Question 3

Written
Earned
Unearned
In-force

Answer 3

Total exposures/premium from policies issued
Portion of exposures/premium for which coverage has been provided
Portion of exposures/premium for which coverage has NOT been provided
The number of insured units or total full-term premium for all policies active at a given point in time.

Question 4

2 ways to aggregate exposure metrics over time

Answer 4

Calendar year (fixed once year is over)
Policy year

Question 5

Formula relation between written, earned, and unearned

Answer 5

CY written = CY earned + CY change in unearned

PY written = PY earned + PY unearned

Question 6

4 ways to aggregate claims metrics over time

Answer 6

CY
AY
RY
PY

Question 7

Formula for reported losses

Answer 7

Reported = paid + change in case