Question
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
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.
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