Risk MGMT and Insurance Exam 2 UMD 2024 with 100% correct answers
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Risk MGMT and Insurance 2 UMD
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Risk MGMT And Insurance 2 UMD
Property and Casualty Insurers: correct answers-
loss reserve is an estimated amount for: correct answers• Claims reported and adjusted, but not yet paid
• Claims reported and filed, but not yet adjusted
• Claims incurred but not yet reported to the company
Case reserves are loss re...
Risk MGMT and Insurance Exam 2 UMD
Property and Casualty Insurers: correct answers-
loss reserve is an estimated amount for: correct answers• Claims reported and adjusted, but not yet paid
• Claims reported and filed, but not yet adjusted • Claims incurred but not yet reported to the company
Case reserves are loss reserves that are established for each individual claim.
*•Methods for determining case reserves include: correct answers• The judgment method: a claim reserve is established for each individual claim • The average value method: an average value is assigned to each claim • The tabular method: loss reserves are determined for certain claims for which the amounts paid depend on data derived from mortality, morbidity, and remarriage tables
unearned premium reserve: is a liability item that represents the unearned portion of gross premiums on all outstanding policies at the time of valuation correct answers• Its purpose is to pay for losses that occur during the policy period • It is also needed so that refunds can be paid to policyholders that cancel their coverage • It also serves as the basis for determining the amount that must be paid to a reinsurer for carrying reinsured polices *• The annual pro rata method is one method of calculating the reserve
Policyholders' surplus: correct answers*difference between an insurance company's assets and liabilities
• The stronger a company's surplus position, the greater is the security for its policyholders • The level of surplus is an important determinant of the amount of new business that an insurance company can write income and expense statement summarizes revenues and expenses paid over a specified period of time correct answers*The two principal sources of revenue for an insurance company are premiums and investment income • Earned premiums are those premiums for which the service for which the premiums were paid (insurance protection) has been rendered • Expenses include the cost of adjusting claims, paying the insured losses that occurred, commissions to agents, premium taxes, and general insurance expenses
Investments-> correct answers• Because premiums are paid in advance, they can be invested until needed to pay claims and expenses *• Investment income is extremely important in reducing the cost of insurance to policyowners and offsetting unfavorable underwriting experience • Life insurance contracts are long-term; thus, safety of principal is a primary consideration • In contrast to life insurance, property insurance contracts are short-term in nature, and claim payments can vary widely depending on catastrophic losses, inflation, medical costs, etc
loss ratio is the ratio of incurred losses and loss adjustment expenses to premiums earned correct answersLoss ratio = (incurred losses + loss adjustment expenses)/premiums earned
expense ratio is equal to the company's underwriting expenses divided by written premiums correct answersexpense ratio = underwriting expense/premiums written
Combined ratio-> correct answersis the sum of the loss ratio and the expense ratio
investment income ratio correct answersinvestment income ratio = net investment income/earned premiums
overall operating ratio correct answers= combined ratio - investment income ratio
Life Insurance companies-> the balance sheet correct answers• The assets of a life insurer have a longer duration, on average, than those of property and casualty insurers
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