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Flashcards in Odomirok 18 Deck (10):
1

List the 3 parts of the IEE

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

2

When does the IEE need to be filed

4/1 following the Annual Statement date

3

List some uses of the IEE

-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

4

What categories are expenses divided into in part 1 of the IEE?

-LAE
-Other Underwriting Expenses (further allocated into Acquisition, Field supervision & collection expenses/general expenses/taxes, licenses & fees)
-Investment expenses

5

What categories does the IEE divide the investment gain into?

-Investment gain on funds attributable to insurance transactions
-Investment gain attributable to capital & surplus

6

What is surplus allocated proportional to?

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

7

Equation for Investment gain ratio

=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

8

Equation for investment gain on funds attributable to insurance transactions

= 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)

9

Formula for prepaid expenses

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

10

Formula for total investment gain

= 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