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SA3 April 2013 Question 1(iv)

J

Jerris

Member
There are some parts of the answer that I do not quite understand

"No non CAT XoL so no issues with use of standardised rather than internal

CAT specific cover in place however and risk mitigating benefits are unlikely
to be reflected well in the CAT module due to highly bespoke nature

...
For the Motor lines of business the requirement to split the exposures into
property damage and third party liability is not something the company would have done as part of their processes previously and as such they would not have historical data available.

Given the company writes Workers Compensation we would have expected a
Health Risk Charge, although they could be assuming this is covered in the
casualty line."

1) What does Cat and Non Cat XoL have to do with making the standardised model less suitable?

2) What is the phrase "Cat Module" referring to?

3) Is the splitting of Motor Lines of business is required by the Standard Formula to determine Premium and Reserve Risk?

4) When the answer says that the health risk charge could be covered in the casualty line, is it the same as saying that the health risk charge might be already included within the "Premium & Reserves" risk capital charge of 199.4m GBP (given in the question)?
 
1) What does Cat and Non Cat XoL have to do with making the standardised model less suitable?

The company doesn't use non-cat XL, so this does not affect the suitability of the standard formula. It does use cat XL though, and the standard formula is unlikely to be suitable for this.

2) What is the phrase "Cat Module" referring to?

This is just the part of the model that models cat risk.

3) Is the splitting of Motor Lines of business is required by the Standard Formula to determine Premium and Reserve Risk?

Yes, eg PD vs BI.

4) When the answer says that the health risk charge could be covered in the casualty line, is it the same as saying that the health risk charge might be already included within the "Premium & Reserves" risk capital charge of 199.4m GBP (given in the question)?

Yes.
 
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