X hits on this document

PDF document

DFA Insurance Company Case Study, Part I: - page 26 / 40

81 views

0 shares

0 downloads

0 comments

26 / 40

Exhibit 3: DFAIC's Gross Loss Ratios by Line of Business

Penc~l~la -- r'175ff~ to ~ l h

1.20

BSOth to 75th

. t.t0

m25th to 50~h

100

O5th to 25~

o.go

0.70

Q

0.00

~

,

Gross Loss Ratios b y Une Accident Year 2

Workom Comgemmtton

AuzoLIa~lty

property

Genor~ Ueio~Jity

NI O~he¢

NI Una Combln~

Une of Buslneu

Referring to Table 7, we compared net loss ratios to aetermine if the various programs were reasonably priced. Then we eliminated structures 2 and 3 from further consideration in the case study because they were not significantly different from the existing program. Finally, we selected structure 4 as the alternative structure for the case study because it produced a significant reduction in net losses' variability. The alternative reinsurance structure (structure 4) replaced the company's per risk and per occurrence coverage with an accident year aggregate stop loss; the catastrophe coverage was unchanged.

In our third and final approach, we reviewed the risk/reward profile of the current and alternative reinsurance programs. The process is illustrated herein .using one alternative to the current reinsurance program, but there is no limit on the number of such alternatives that could be considered. Our risk/reward analysis is based on the economic value of the company's surplus (reward) and the standard deviation of the same (risk). We plot these figures on a simple graph with risk on the X-axis and reward on the Y-axis (see Exhibit 4). Points that are up (greater reward) and to the left (lower risk) are preferable to those that are down and to the right (lower reward/greater risk).

84

Document info
Document views81
Page views81
Page last viewedSun Dec 04 06:14:16 UTC 2016
Pages40
Paragraphs886
Words12361

Comments