• 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.

SA1 - Sep 2020 paper

M

mossie

Member
Hello,

I have a question regarding the Sep 2020 paper, would be great if someone could help.

In question 3 (iii), Describe how the premium review process could be conducted, the exam solution had one point:

As reinsurance is not part of the contractual agreement between the insurer and its policyholders, any profit or loss relating to the costs and recoveries of any reinsurance arrangements will not be considered as part of the premium review exercise.

Is that really true? Considering reinsurance premium is an expense to the insurer, a cost, if the reinsurance rates go up following a review by the reinsurer, surely the insurer would want to factor that additional cost into the premium they charge?

Thanks
 
Hi Mossie

Whether or not reinsurance is considered as part of the premium review will depend on the terms of the premium review process (which will need to be set out clearly for policyholders to see). The insurer would almost certainly not be allowed to recover losses that had already been incurred from the reinsurance arrangements (and I think this is the point the examiners were making). However, if reinsurance premiums were to increase, as you suggest, it may be allowed to factor these in to the premium review.

I hope that helps.

Sarah
 
Thanks Sarah.

I think the solution could be clearer. Since the sentence "As reinsurance is not part of the contractual agreement between the insurer and its policyholders" is really an assumption made by the person who wrote this solution since this was not stated in the question. I hope you could feed this back to IFoA? Thanks.
 
You must log in or register to reply here.
Back
Top