General Insurance Flashcards
What’s a Risk Sharing Pool (RSP) by the Facility Association (FA)?
Allows insurer to cede some of their risks on their own books for which they consider premiums to be
inadequate for the risk.
There are Risk Sharing Pools in Ontario, Alberta, New Brunswick and Nova Scotia, and they apply only to private passenger vehicles. The Risk Sharing Pools are administered by the Facility Association (FA).
Ceding policies that have a higher loss ratio than the RSP average to the RSP is a good idea for the insurer.
What’s the Facility Association (FA)?
Goal of FA: to ensure (auto insurance availability) for (all owners & licensed drivers) unable (to obtain coverage through the voluntary market). It was created by the insurance industry and is an unincorporated non-profit of all auto insurers.
FA uses 3 risk-sharing mechanisms
- risk sharing pools (RSP)
- the Facility Association residual market (FARM)
- the Uninsured Automobile Funds (UAF)
The ideal is to pool the risk.
How are Facility Association (FA) services different from reinsurance?
The goals are different. Facility association is an organization that is funded by all property and casualty insurance companies with an objective to provide auto insurance to all drivers who are considered “high-risk” drivers. These drivers would not otherwise be able to get insurance from other insurance providers.
Insurers can cede out risk by pooling but it’s not like they’re transferring the risk to FA; therefore that doesn’t make FA a re-insurer. FA is also not for profit.
What’s an Uninsured Automobile Funds (UAF) by the Facility Association (FA)?
Persons who may claim from the Fund include those who cannot obtain satisfaction for damages under a contract of automobile insurance; those who do not have other insurance; and those who do have other insurance, but it is inadequate.
The respective provincial Insurance Acts govern payment of these claims. The Facility Association monitors the investigation, defense and final settlement of these claims through the assistance of designated law firms.
Data Generation process of the claim data?
Poisson Frequency & Tweedie Severity
Purpose of the Smoothing Spline?
The purpose is to work with a fit with curvature, instead of a line.
A spline is a piece wise function where each piece is a polynomial. To not overfit, smoothing Spline minimize the (MSE + a penalizing term used for penalizing wiggly fits). The penalizing term contains second derivative of the function (curvature)
What’s GAM?
Generalized additive models (GAM)
Formula looks like a bunch of nonlinear terms added together
What’s a backfitting algorithm?
the backfitting algorithm is a simple iterative procedure used to fit a generalized additive model.
ATV?
all terrain vehicle
