Gampel Insurance Company is preparing several insurance proposals for Mirror Lake Manufacturing. The estimated loss distribution...
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Gampel Insurance Company is preparing several insurance proposals for Mirror Lake Manufacturing. The estimated loss distribution for Mirror Lake is as follows: Loss Amount Probability 1% 4% 10% 25% 35% 25% $350,000 $100,000 $50,000 $20,000 $5,000 $0 This loss distribution is the same for each question in this assignment. Each full question is worth 20 points (5 points per part) 5. Assume: • Losses are paid over a 5 year period: 50% at the end of the first year; 25% at the end of the second year; 10% at the end of the third year; 10% at the end of the fourth year and the remaining 5% at the end of the fifth year .Underwriting expenses are 15% of pure premium and are paid at policy inception • Claim settlement expenses are $600 per claim, and are paid when the losses are paid . Required capital is 25% of fair premium . Targeted return on capital is 15% . Interest rate is 8%. a. What is Gampel's estimate of the pure premium? b. What is the provision in the fair premium for (discounted) claims settlement expenses? c. What is Gampel's estimate of the fair premium? d. What is the fair profit loading for the premium? Gampel Insurance Company is preparing several insurance proposals for Mirror Lake Manufacturing. The estimated loss distribution for Mirror Lake is as follows: Loss Amount Probability 1% 4% 10% 25% 35% 25% $350,000 $100,000 $50,000 $20,000 $5,000 $0 This loss distribution is the same for each question in this assignment. Each full question is worth 20 points (5 points per part) 5. Assume: • Losses are paid over a 5 year period: 50% at the end of the first year; 25% at the end of the second year; 10% at the end of the third year; 10% at the end of the fourth year and the remaining 5% at the end of the fifth year .Underwriting expenses are 15% of pure premium and are paid at policy inception • Claim settlement expenses are $600 per claim, and are paid when the losses are paid . Required capital is 25% of fair premium . Targeted return on capital is 15% . Interest rate is 8%. a. What is Gampel's estimate of the pure premium? b. What is the provision in the fair premium for (discounted) claims settlement expenses? c. What is Gampel's estimate of the fair premium? d. What is the fair profit loading for the premium?
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a 350000 x 1 3500 100000 x 4 4000 50000 x 10 5000 20000 x 25 5000 5000 x 35 1750 Pure p... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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