T
thistleandspice
Member
Hi all,
I've been puzzled by a couple of flashcards for a while now, and wondered if anyone could expand/explain in another way what the following two actually mean - ie WHY the following methods would work/be done in practice:
1. Allowing for the cost of reinsurance in pricing
Either use - gross risk premium plus net reinsurance cost ( where small proportion of gross premium passed to reinsurer),
or net risk premium plus gross reinsurance cost (where there is high level XL/cat reinsurance).
2. Allowing for investment income
i) Long-tail classes - discount projected claims and expense cashflows to the date of premium payment, usually assuming a conservative rate of return
ii) Short-tailed/volatile long-tailed classes - adjust the profit loading to allow roughly for premium investment income
Many thanks!
Thistle
I've been puzzled by a couple of flashcards for a while now, and wondered if anyone could expand/explain in another way what the following two actually mean - ie WHY the following methods would work/be done in practice:
1. Allowing for the cost of reinsurance in pricing
Either use - gross risk premium plus net reinsurance cost ( where small proportion of gross premium passed to reinsurer),
or net risk premium plus gross reinsurance cost (where there is high level XL/cat reinsurance).
2. Allowing for investment income
i) Long-tail classes - discount projected claims and expense cashflows to the date of premium payment, usually assuming a conservative rate of return
ii) Short-tailed/volatile long-tailed classes - adjust the profit loading to allow roughly for premium investment income
Many thanks!
Thistle