Hi, I had written the following points as part of my answer but they did not score any marks. I wanted to check if they were valid or not. If they aren't valid, could you please explain why? I may be misunderstanding the question Reinsurance renegotiation - may have been renegotiated, company reinsuring less, so lower reinsurance premium in the expenses Investment strategy may have changed - e.g. now investing in assets with lower investment management expense Thanks in advance
The question is asking about a per policy renewal expense loading (for pricing) of £X per annum. Reinsurance costs are not 'renewal expenses' as such. As indicated in Chapter 23 Section 1.2 (see final bullet point), reinsurance costs would typically be loaded explicitly into the premium, rather than being included as part of the basic 'expenses'. Also, reinsurance cost would vary by size of policy - so it would not be appropriate to load that cost as a fixed amount per policy. It is also debatable as to whether investment expenses are 'renewal expenses' as such - they don't really relate to administering the renewal of the business. Furthermore, as is described on page 10 of Chapter 21, they would normally be loaded as a percentage of funds under management (possibly through a deduction from the assumed investment return) - and so again aren't consistent with the per policy renewal expense loadings of £X per annum that are being asked about here.
