Question
Assume the following: a. Pinnacle Insurance Company is formed 6/30/16 with $10MM of capital (surplus). b. Pinnacle sells 1 commercial insurance policy 10/1/16, that provides
Assume the following: a. Pinnacle Insurance Company is formed 6/30/16 with $10MM of capital (surplus). b. Pinnacle sells 1 commercial insurance policy 10/1/16, that provides 12 months of coverage, with premium of $20MM. c. A $1MM claim is paid on 11/30/16. However, Pinnacle learns of another claim that occurred in late December 2016, which it estimates will amount to $3MM, and will be paid in January 2017. d. Expenses for the period 6/30 to 12/31/16 are $1MM e. Pinnacle sells no more business in 2016. f. Other (new) claims are incurred (accident or incident associated with the claim is in 2017) and are paid in 2017 for $10MM. g. It appears by the end of 2017 that no more claims need be paid for this policy. h. Expenses in 2017 are $3MM. i. Investment income in both years is $1MM.
Compute: 1. the Unearned Premium Reserve at the end of 2016
2. the Claim, or Loss, Reserve at the end of 2016
3. Earned Premiums for 2016
4. Incurred Claims for 2016
5. Earnings for 2016
6. Assets at end of 2016
7. Liabilities at end of 2016
8. Surplus at the end of 2016 (there are 2 ways to get to this, and if they dont agree, youve done something wrong!)
9. Unearned Premium Reserve at the end of 2017
10. Claim Reserve at the end of 2017
11. Earned Premiums for 2017
12. Incurred Claims for 2017
13. Earnings for 2017
14. Surplus at the end of 2017
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