Odomirok 12

Question 1

Five-Year Historical Data Exhibit

Answer 1

Provides five years worth of data (including the current year).

Question 2

Sections of Five-Year Historical Exhibit of most interest to actuaries

Answer 2

• Written Premium
• Balance Sheet
• Risk-Based Capital
• Operating Percentages
• One and Two Year Loss Development

Question 3

Written Premium section

Answer 3

Shows gross and net premiums, summarized by the following five lines:

• Liability
• Property
• Property and liability combined
• All other
• Non-proportional reinsurance

Question 4

Uses for Written Premium section

Answer 4

To see changes over time in:

• Premium
• Use of reinsurance
• Business mix

Question 5

Things to look out for in Written Premium section

Answer 5

• rapid change in revenue
• changes in level of reinsurance protection
• increase in exposure to riskier/unprofitable lines
• shifts from liability to property lines (increased catastrophe loss)
• shifts from property to liability lines (more uncertain reserves)

Question 6

Uses of Balance Sheet section

Answer 6

Helps identify the components of the change in surplus.

• the actuary would be particularly interested in a move to riskier assets
• the change in loss reserves, unearned premium, and surplus relative to the business mix would also be valuable information

Question 7

Risk-Based Capital section

Answer 7

Shows the components of the RBC ratio (but not the actual ratio). Users can however calculate the ratio based on the info given.

Question 8

Operating Percentages section

Answer 8

Shows the changes in ratios to earned premium of the following:

• Loss
• LAE
• Other underwriting expenses
• Profit

Question 9

One and Two Year Loss Development section

Answer 9

Very important to reserving actuaries; some development is expected, which will cause changes to reserves. However, users should be concerned if the development is significant relevant to surplus.