Term
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Definition
| Premium - Loss & Expenses + Investment on Policyholder supplied funds |
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Term
| McClenahan Investment assumptions |
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Definition
| assumes only returns are at rf; anything above that is borne by shareholders |
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Term
| 3) Simple profit calculation is appealing |
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Definition
1) does not depend on surplus
2) does not include excess investment return
3) nor investment on surplus |
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Term
| Problem with using P/Surplus Ratios to Allocate |
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Definition
| How to calculate? Effectively just Return on Sales with multipler |
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Term
| 3 ways to determine if prospective returns are reasonable |
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Definition
1) Size of residual market
2) number of insurers in the voluntary market
3) degree of product diversity and innovation |
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Term
Opportunity Cost to policyholder
2 factors |
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Definition
Policyholders needs to be compensated for delay between premiums and losses.
1)Line of business - time to loss payout
2)Insurer infrastructure costs |
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Term
| Problems with ROE regulation |
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Definition
1)Leverage
2)Surplus allocation for multiline companies |
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Term
|
Definition
like markup on premium
1)Means more to policyholder
2)Less ambiguity than ROE |
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Term
| 2) Current underwriting results influenced |
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Definition
1)Current reserving decisions
2)Amortization of past reserving decisions |
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