FRM Part I · FRM Exam Part I · Insurance Companies and Pension Plans
A property-casualty insurer earns premiums of 200 million, incurs claim losses of 130 million, and has underwriting expenses of 76 million. Ignoring dividends to policyholders, what is its combined ratio?
The combined ratio is 103%. The loss ratio is 130/200 = 65% and the expense ratio is 76/200 = 38%, and their sum is 103%. A figure above 100% means an underwriting loss before any investment income is considered.
- A103%Correct
- B65%
- C38%
- D141%
Explanation
Loss ratio = 130/200 = 65%. Expense ratio = 76/200 = 38%. Combined ratio = 65% + 38% = 103%, so the underwriting result is a loss before investment income. Using 65% alone ignores expenses; 141% wrongly adds expenses to 103%.
Did you get it right without looking?
One question tells you little. A timed set on Insurance Companies and Pension Plans shows your real accuracy, how long you take and where you lose marks.
More Insurance Companies and Pension Plans questions
- A mortality table shows the following for a cohort: 100,000 people alive at age 60, 98,000 alive at age 61, and 95,900 alive at age 62. What…
- A life insurer sells a 20-year term life policy to a 40-year-old. Which description best fits this product?
- An insurer writes premiums of $300 million and earns $240 million of them in the year. Incurred losses are $168 million. Underwriting expens…
- Which feature is characteristic of a DC plan rather than a DB plan?
- A life insurer sells a 20-year term life policy and a whole life policy to otherwise identical 40-year-old non-smokers with the same face am…
- A 10-year term life insurance policy pays a death benefit only if the insured dies within 10 years of issue and pays nothing if the insured …