Odomirok 18

Question 1

List the 3 parts of the IEE

Answer 1

1. Part 1: Allocation of other underwriting expenses
2. Part 2: Allocation of pretax prot by line, on a net basis
3. Part 3: Allocation of pretax prot by line, on a direct basis

Question 2

When does the IEE need to be filed

Answer 2

4/1 following the Annual Statement date.

Question 3

List some uses of the IEE

Answer 3

• Regulators: monitor the financial health of the insurer. It may indicate trends by line of business may threaten the solvency of the entire insurer
• Regulators: monitor rate adequacy.
• Stakeholders: determine the lines that were profitable, and use this knowledge to help make business decisions
• Investors: help determine how much to invest in the insurer
• Actuaries: source of premium, losses and expenses for benchmarking

Question 4

What categories are expenses divided into in Part 1 of the IEE

Answer 4

• LAE
• Other Underwriting Expenses (further allocated into Acquisition, Field Supervision & Collection Expenses/ General Expenses/ Taxes, Licenses & Fees)
• Investment Expenses

Question 5

What categories does the IEE divide the investment gain into

Answer 5

• Investment Gain on Funds Attributable to Insurance Transactions
• Investment Gain Attributable to Capital & Surplus

Question 6

What is surplus allocated proportional to

Answer 6

Mean net loss & LAE reserves + Mean UPR + EP for the year

Question 7

Equation for Investment gain ratio

Answer 7

= Net investment gain / Total investable assets
* Where Total investable assets = Mean net loss & LAE reserves + Mean net unearned premium reserves + Mean ceded reinsurance premiums payable + Mean policyholders’ surplus - Mean agents’ balances

Question 8

Equation for Investment gain on funds attributable to insurance transactions

Answer 8

=Investment gain ratio * Funds attributable to insurance transactions for the line
* Where the funds attributable to insurance transactions for each line:
=Mean net loss & LAE reserves + Mean UPR * [1 - (prepaid expenses / written prem)] - (Mean net agents’ balances - ceded reinsurance premiums payable)

Question 9

Formula for Prepaid Expenses

Answer 9

Commission & Brokerage expenses incurred + Taxes, licenses & fees incurred + Other acquisition, field supervision & collection expenses + (1/2) * general expenses incurred

Question 10

Formula for Total Investment Gain

Answer 10

=company’s investment gain ratio * investable funds associated with the LOB
* Where investable funds associated with the LOB = Mean net loss & LAE reserves + Mean UPR - Mean net agents’ balances + Ceded reinsurance premiums payable + Allocated PHS.