Describe how the catastrophe loading required for pricing a class of business may be

estimated. [3]

2 A reinsurance company wishes to price a $2m xs $1m excess of loss treaty. It has

asked the cedant to provide historical loss data in excess of $1m.

Describe the potential disadvantages of this approach when pricing the treaty. [5]

3 In a particular country, technological advances in the manufacture of cars over the

last two years have led to safer and more secure cars. A recent article written in a

motor car magaz ine shows insurance premiums for new cars over the last two years

have increased at a rate in excess of the national rate of price inflation.

Suggest possible reasons for the continued rise in premiums despite the

technological advances. [6]

4 A proprietary insurance company writes a number of lines of business. For several

years the professional indemnity cover has been loss- making, and the insurance

company is considering closing the line of business.

5 An insurance company has employed a consultant to review the pricing of its portfolio

of marine hull and cargo risks. The consultant has suggested using benchmark data

provided by his firm based on the firm's work with other insurance companies.

(i) Outline the reasons why the consultant may have made this suggestion. [5]

(ii) Suggest four concerns the insurance company might have about the

benchmark dat

6 A general insurance company writes crop insurance for farms located in the USA.

(i) List the perils likely to be covered by crop insurance. [3]

(ii) Suggest rating factors the insurance company is likely to use to determine the

risk premium. [2]

The pricing actuary has built a model to estimate the risk premium. The model has

been built using claims and exposure data the insurance company has collected over

the last 30 years. The insurance company sells policies via brokers and handles all

claims itself.

(iii) Explain the risks and uncertainties that may arise with the use of this data.