IEE

Question 1

describe parts of IEE

Part I

Part II

Part III

interrogatories

Answer 1

I does NOT show profit (loss) + allocates expenses (from part III) into groups

II YES show (pre-tax) profit (loss) NET of reinsurance

III YES show (pre-tax) profit (loss) GROSS of reinsurance

interogatories - state allocation method of profits & expense by LOB

Question 2

IEE part I allcoates other UW expenses into 3 buckets

name 3 buckets

Answer 2

1. acquistion , field supervision, and collection expenses
2. general expense
3. taxes, licenses and fees

Question 3

IEE part 2 vs IEE part 3

reinsurance

investment gain

Answer 3

part 2: Net of reinsurance + include investment gain (inv inc is earned on assets net of reinsurance)

vs part 3: gross of reinsurance + exclude investment gain

Question 4

Describe IEE

LOB or total

state or countrywide

losses

expenses

Answer 4

Profit or loss by …

LOB

countrywide

Losses: incurred & unpaid

expenses: 3 buckets of UW expenses (TL&F, acquisition, general)

Question 5

Users of IEE (4)

what they use it for

Answer 5

Regulators monitor (un)profitability

Stakeholders identify (un)profitable LOB

Actuaries benchmark company performance by LOB

Investors decide whether to invest

Question 6

IEE most important interrogatory

Answer 6

Regarding expense/profit allocation by LOB…

a) any items need special comment or explanation &
b) any allocation method used that was not in instructions

Question 7

IEE vs Income Statement

LOB

reinsurance

Answer 7

LOB separate vs LOB combined

Direct & net of reinsurance vs net of reinsurance

Question 8

IEE vs UW & Insurance Expense Exhibit

UW expenses

losses

Answer 8

UW expenses: seperated (General, TLF, acquisition expenses) vs combined

Losses: Incurred & Unpaid vs just Incurred

Question 9

IEE vs Prem&Loss Exhibit

markets

expenses

reinsurance

Answer 9

markets: Countrywide vs by state

expenses: Buckets of expenses vs expenses combined

reinsurance: Net & gross of reinsurance vs just direct of reinsurance

Question 10

Adv of IEE surplus allocation method R2DC – not likely to be asked

Answer 10

Uses 2 yrs of data (reduces distortions)

Not distorted by Reinsurance

Easy to obtain Data (annual statement data)

Easy to Calculate /Compare across companies

Question 11

Disadv of IEE surplus allocation method FARC – not likely to be asked

Answer 11

Uses prior 2 yrs of data (Retrospective doesn’t account for future growth)

Does not allow Actuarial input (formulaic)

Does not allocate surplus on the inherent risk of LOB (also change in business mix - long tail vs short tail)

Does not recognize Cat risk

Question 12

Answer 12

Question 13

Answer 13

Question 14

Answer 14

m(re) = ceded reinsurance premium payable

Question 15

Answer 15

Question 16

Answer 16

Question 17

Answer 17

Question 18

Answer 18

Question 19

Answer 19

Question 20

Answer 20

Question 21

Answer 21

Question 22

Answer 22

Question 23

Answer 23

Question 24

Answer 24

Question 25

Answer 25

Question 26

Answer 26