chapter 8 Flashcards
what does the bornhuetter-ferguson method of claims reserving involve
either a paid loss or incurred loss development
as the experience to date becomes more developed more reliance is placed on it
how is claims run off calculated
incurred cost during the year on the amount set aside for claims at the start of the year
five factors which may have an influence on the uncertainty over setting an appropriate level of claims reserve
legislative change
claims emerging from risks written many years ago
failure to recover reinsurance
unanticipated changes in claims inflation
outcome of litigation on existing claims
for which type of claims would an exposure based method of claims reserving be appropriate
very long tail liabilities with high degrees of uncertainty
e.g. pollution and health hazard exposures
what are discounted claims
the amount set aside is reduced by the investment income expected to be earned int he future on the investments supporting the claims
profitability ratios
gross and net profit percentage and return on capital
combined ratio (including the claims, commission and expenses ratios), roe and gearing ratio
productivity ratios
debtors collection period, creditors payment period and stock turnover period
liquidity ratios
current ratio and quick ratio
ratio of total liabilities to cash plus investments
activity ratios
stock turnover ratio, debt turnover ratio, creditor turnover ratio
gearing ratios
ratio of long term borrowings to shareholders equity
solvency ratios
solvency coverage ratio or ratio of net assets to earned premium
outstanding claims
ratio of outstanding claims to net assets
limitations of ratios
quality of financial information available, information that is available to the public is often out of date
