Faculty of Actuaries Institute of Actuaries
EXAMINATIONS
April 1999
Subject 403 — UK Fellowship General Insurance
Paper One
You must answer this subject only,
you may not attempt another subject in the 400 series.
Time allowed: Three hours
INSTRUCTIONS TO THE CANDIDATE
1. You have 15 minutes at the start of the examination in which to read the
questions. You are strongly encouraged to use this time for reading only but
notes may be made. You then have three hours to complete the paper.
2. You must not start writing your answers in the booklet until instructed to
do so by the supervisor.
3. Write your surname in full, the initials of your other names and your
Candidate’s Number on the front of the answer booklet.
4. Mark allocations are shown in brackets.
5. Attempt all 6 questions, beginning your answer to each question on a
separate sheet.
AT THE END OF THE EXAMINATION
Hand in BOTH your answer booklet and this question paper.
In addition to this paper you should have available
Actuarial Tables and an electronic calculator.
ã Faculty of Actuaries
403(1)—A99 ã Institute of Actuaries
403(1)—2
1 You are the actuary of a general insurance company, and have been asked to
model the economic value of an insurance product using net present value
techniques.
(a) List the key assumptions in the modelling process. [3]
(b) Describe the considerations involved in choosing values for these
assumptions. [9]
[Total 12]
2 (i) Outline the basis of taxation of a United Kingdom proprietary general
insurance company. [4]
(ii) Describe the extent to which each reserve can be offset against tax. [4]
[Total 8]
3 (i) Define the terms exposure measure, risk factor and rating factor. [4]
(ii) State an appropriate exposure measure and list the risk factors and
rating factors for each of the following classes of business:
(a) Employers’ Liability
(b) Marine Hull [10]
[Total 14]
4 (i) Define the following terms:
(a) excess of loss reinsurance
(b) experience rating [3]
A reinsurer has been asked to quote for a 500,000 excess of 500,000, unindexed,
each and every loss cover, on a portfolio of 1000 identical risks, all written
with a sum insured of 2 million, for the 1999 underwriting year. The following
information has been provided:
Accident Number Ground-up loss
year of policies development factor
1996 700 1.3
1997 800 1.4
1998 900 1.5
Claims inflation has been at a level of 3% per year compound throughout this
period and will continue to be at that level. Pure IBNR is negligible, but
reported claims may be expected to increase in line with the appropriate
ground-up loss development factor. The following is a list of the paid amounts
plus outstanding reserve on all claims exceeding 250,000.
403(1)—3 PLEASE TURN OVER
Accident
year
1996 300,000 600,000 900,000
1997 400,000 700,000 800,000 500,000
1998 350,000 800,000 400,000 650,000
(ii) Calculate an experience rated pure loss cost for the layer, for the 1999
accident year. [5]
An alternative method has been suggested to determine the pure loss cost,
based on the limited expected value (LEV) curve shown below. This curve
shows, for example that if claim payments were limited to 25% of the sum
insured then total loss costs would be 80% of the level they would otherwise
be.
Percentage of su[1] [2] [3] 下一页 |
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