Term
| Roth 1) Can you calculate P/Surplus Ratios for all Insurers? |
|
Definition
| Not Theoretically Possible to allocate to line of business => not possible by insurer |
|
|
Term
| Roth 2) What is the proper way to measure income? |
|
Definition
| Reflect all sources, capturing the change in surplus (excluding paid in or paid out -dividends) |
|
|
Term
| Roth 3) Required Return for Insurers |
|
Definition
| Amounted that will allow them to continue to provide capacity needed by society |
|
|
Term
| Roth 3b) 3 provisions for Required Return |
|
Definition
1) Inflation
2) Changes in valuation of existing Liabilities
3) Changes in demand for insurance
ds = Claims Inflation + Old Res Change over Inflation + Increase in Demand |
|
|
Term
| Roth 4) Stock insureres require additional provision |
|
Definition
1) Dividend that will ensure investors earn reasonable return on market value
and attract additional needed capital |
|
|
Term
| 3) Problems with allocation of surplus |
|
Definition
1) Aggregate Surplus is unique to each
2) All surplus stands behind each risk
3) Surplus will vary at any point in time |
|
|
Term
| Accounting Standards impact on ds |
|
Definition
| change in surplus is independent of GAAP or Statutory ds/S should be equal |
|
|
Term
| 2) Fair and Reasonable rate of return |
|
Definition
Supreme Court ruled RoR should be 1)commensurate with returns in other enterprises with similar risks
2)sufficent to atract capital |
|
|
Term
| ds/S is sufficent if provides 3 |
|
Definition
1)expense and claim inflation
2)increase in aggregate reserves
3)increase in demand for insurance |
|
|
Term
| 3) Market value of Insurance company |
|
Definition
1) is true measure for stockholders
2) ratio to surplus value should flucuate in fair market so that shareholders earn fair return
3)Therefore return on Surplus must be competetive equalibrium rate of return |
|
|
Term
| Deflated Reserves to aggregate reserves |
|
Definition
| Deflated reserves - Increase in Demand for insurance = Aggregate Reserves |
|
|
Term
|
Definition
1)Aggregate Reserves
2)Increase in Demand for Insurance
3)Expense and Claims inflation
4)Stockholder Dividends |
|
|
