1.
Durant Fire Insurance has a retention limit of BD 100,000 and ceded the remaining BD 200,000 to Cury
Fire Insurance Company. Considering the reinsurance agreement entered by both insurance company,
compute the following;
a. Total Underwriting Capacity as an effect ceding. (1 mark correct value)
b. Distribution of loss if the underwriting value of the loss is BD 250,000 and the actual incurred
loss is BD 12,000. (2 mark for the correct process + 1 marks for the correct answer = 3 marks)
2.
Below is the Income and Expense Statement of HEI Insurance Company;
HEI Insurance Company
Income and Expense Statement
January 1, 2018–December 31, 2018
A= 900000
B= 200000
Revenue
A
1,000,000.00
Premiums Written
Premiums Earned
800,500.00
Investment Income
Interest
Dividiends
Rental Income
Gain on Sale of Securities
Total Investment Income
300,000.00
100,200.00
50,000.00
10,000.00
460,200.00
Total Revenue
1,260,700.00
Net Lossess Incured
Loss Adjustments Expenses
Total Lossess and Loss Adj. Expenses
B
300,000.00
10,200.00
Commission
Premium Tax
General Insurance Expense
Total Underwriting Expense
Total Expenses
290,000.00
10,000.00
320,000.00
310,200.00
Net Income Before Tax
Federal Income Tax
Net Income
620,000.00
930,200.00
330,500.00
105,760.00
224,740.00
Requirements;
a. Using the statement above compute for the following financial performance indicators;
[ (1 mark for the correct process + 2 marks for the correct answer) x (5) ] = 15 marks
i. Loss Ratio
ii. Expense Ratio
iii. Combined Ratio
iv. Investment Income Ratio
v. Over-all Operating Ratio
b.
Assuming that the number of exposures of Jasim Insurance Company is 900,000 units and their expected
loss ratio is 30%, using requirement (a) find the following;
[ (1 mark for the correct process + 2 marks for the correct answer) x (2) ] = 6 marks
i. Gross rate (pure premium method)
ii. Rate of change (using loss ratio method)
3.
In Manama, BBK Insurance covered 5,000 commercial spaces for 2019. The company estimates that a
there is a 2% chance of loss caused by any peril in the area covered. In addition, per historical data, 80 to
120 buildings experience some form of loss in a year.
Requirements;
a. What is the expected value of loss?
(3 marks for the correct process + 2 marks for the correct answer = 5 marks)
b.
What is the objective risk of the area covered by BBK?
(3
4.
marks for the correct process + 2 marks for the correct answer = 5 marks)
Lulu and City Center both own an identical storage building in Sitra valued at BD 10,000. It was estimated
that there is a 8 percent chance in any year each storage will be destroyed (loss to either of the building are
independent). Both Lulu and City Center agreed to share the risk and agrees to pay equal amount of share
in case of a loss.
Requirements;
a. Calculate the expected loss for each of the parties involved.
(3 marks for the correct process + 2 marks for the correct answer = 5 marks)
b.
Estimate the objective risk before pooling.
(3 marks for the correct process + 2 marks for the correct answer = 5 marks)
c.
Estimate the objective risk as a result of the pooling.
(3 marks for the correct process + 2 marks for the correct answer = 5 marks)