Chapter 5

Question 1

Risk premium

Answer 1

premium to fund claims takes into account time value of money

Question 2

Risk premium based on

Answer 2

subject matter
exposure size
scope of cover
rating factor
previous claims
large cat claims
future

Question 3

Cat caims and pricing

Answer 3

build amount into pricing structure as cat fund

Question 4

Premium cals

Answer 4

Minimum prmeium
Adjustable

Question 5

Burning cost - high freq of claims, within narrow distribution size

Answer 5

risks that generate significant number of claims

Medium and large risk BC used as comparator

Total cost of claims / measure of exposure

number of claims must be statistically significant

Question 6

why burning cost is effective

Answer 6

transparent rating
easy to understand
nased on own claims exp
no risk of claims records from other companies

Question 7

Drawback of BC

Answer 7

not reflect ultimate value of claims -> claims triangulations
inflation not accounted for

Question 8

prospective risk anaysis

Answer 8

analysing data they have available to them