IRIS

Question 1

Equation and Normal Range for GWP: PHS

Answer 1

Equation: GWP/PHS

Normal Range: < 900%

Question 2

Factors to consider if Ratio 1 is unusual:

Answer 2

• compare to Ratio 2
• line of business
• profitability
• direct vs assumed business

Question 3

Equation and Normal Range for NWP: PHS

Answer 3

Equation: NWP/PHS

Normal Range: < 300%

Question 4

Factors to consider if Ratio 2 is unusual:

Answer 4

• if member of group of affiliates, what is the aggregate ratio?
• profitability
• line of business
• adequacy of reinsurance protection

Question 5

Equation and Normal Range for Change in NWP

Answer 5

Equation: [Current NWP - Prior NWP] / Prior NWP

Normal Range: Between -33% and 33%

Question 6

Factors to look into if Change in NWP ratio is unstable:

Answer 6

• are the assets properly valued & liquid enough to meet cash demands
• are the reserves adequate?

Question 7

Increased NWP does not necessarily mean there is a greater chance of insolvency, if it is accompanied by:

Answer 7

• low NWP: PHS ratio (Ratio 2)
• adequate reserving (Ratios 11, 12, 13)
• profitable operations (Ratio 5)
• stable product mix

Question 8

Equation and Normal Range for Surplus Aid: PHS

Answer 8

Equation: Surplus Aid/PHS

Surplus Aid =
Ceding Commissions Ratio × Sum of UEPR (Non Affiliates)

Normal Range: < 15%

Question 9

Issues related to a high Surplus Aid ratio:

Answer 9

• it may indicate that management believes that surplus is inadequate
• surplus aid may improve the results of the other ratios to such a degree that it conceals important areas of concern.

Question 10

Equation and Normal Range for 2yr overall operating ratio

Answer 10

Equation: 2yr Loss Ratio + 2yr Expense Ratio + 2yr Investment Ratio

Normal Range: < 100%

Question 11

Equation and Normal Range for Investment Yield

Answer 11

Equation:

2 × Net Investment Income Earned/Cash & Invested Assets between Current & Prior Yrs

Normal Range: Between 3% and 6.5%

Question 12

Equation and Normal Range for Gross change in PHS

Answer 12

Equation: Change in PHS/Prior PHS

Normal Range: Between -10% and 50%

Question 13

Equation and Normal Range for Change in adjusted PHS

Answer 13

Equation: Change in Adjusted PHS/Prior PHS

Change in Adjusted PHS = Change in PHS Change in Surplus Notes Capital Paid in or Transferred Surplus Paid in or Transferred

Normal Range: Between -10% and 25%

Question 14

Equation and Normal Range for Adjusted Liabilities: Liquid Assets

Answer 14

• Equation: Adjusted Liabilities/Liquid Assets
• Adjusted Liabilities = Liabilities equal to Deferred Agents Balances
• Liquid Assets are net of investments in parents, subsidiaries & affiliates
• Normal Range: < 100%

Question 15

Equation and Normal Range for Gross Agents Balances: PHS

Answer 15

Equation: Gross Agents Balances in the course of collection/PHS

Normal Range: < 40%

Question 16

Equation and Normal Range for 2yr Reserve development to PHS

Answer 16

Two yr reserve development/2nd prior PHS

• < 20%

Question 17

Equation and Normal Range for Estimated Current Reserve Deficiency to PHS

Answer 17

Equation: Deficiency/PHS

Reserves Required = Premiums Earned × Ratio of Reserves:Premium

Normal Range: < 25%