• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Subject 303 Sept 2002 Question 6

A

ActEdStudent

Member
This question gives written premiums and earned premiums by calendar year, and net loss ratios on an occurrence basis, from which you need to calculate underwriting year loss ratios.

The answer in the revision booklet makes the assumption that 2/5ths of business is earned in the year it is written, and the rest is earned the next year. Given business started in the first year for which we have data though, can't you calculate how much of the earned premium for each year relates to which underwriting year directly, by assuming all premium earned in the first calendar year related to business written in the first calendar year, and policies are no longer than annual?
 
Yes you can, but that's where the 2/5ths comes from.

10/25 = 2/5ths. the remaining 15 must be earned in 1999, so (35-15) / 50 = 2/5ths etc.

I suppose you could argue it's not an assumption.
 
You must log in or register to reply here.
Back
Top