Spring 2018 #16 B
In calculating IRIS ratio 2, I understand the concept of subtracting the ceded reinsurance premiums to go from GWP to NWP but I'm having a hard time reconciling the idea of $48 being ceded to non-affiliates with only $35 being assumed for non-affiliates. Is this actually possible and I'm missing something about reinsurance?
Comments
Eh, think I figured it out. The $48 being ceded is from the direct premium written. The $35 being assumed is premium (business) the company is taking on which is reinsurance sold to another company.
Yup! I always like to see when students are able to answer their own questions because it shows you're really engaged! Keep up the good work!
I am struggling understanding the examiner's report. Beyond the fact that I think they labeled their answers wrong (isn't PHS removed if unusual, not usual which is opposite of sample 1).
If you calculated a usual answer for part A why then would you calculate the IRIS 1 & 2 removing surplus aid? I get that if it unusual it has to be removed but I would think based off their sample answers you should be able to get full credit if you calculated usual for IRIS 4 then the un-adjusted IRIS 1/2. Am I missing something?
Yes, they seem to have reversed the labels for the 2 versions of the IRIS 1&2 calculation.
If IRIS 4 is within the usual range then no adjustment to IRIS 1&2 is necessary. You should get full credit if you found IRIS 4 to be in the usual range in part (a) and then calculated the unadjusted values for IRIS 1&2 in part (b).
I've added a footnote to the NAIC.IRIS BattleTable for this question. Thanks for pointing it out.
I've noticed that exam questions with a lot of financial statement information are sometimes ambiguous like this. This is something to keep in mind during the exam. You may have to make extra assumptions to be able to do the problem but make sure you state your assumptions (It's also maybe a good idea to send an email to the CAS about a possible defective question immediately after the exam.)