Quantify the underwriting loads in a rate indication: fixed versus variable expenses, the profit and contingency provision, and reinsurance costs.

Free CAS Exam 5 (Basic Ratemaking and Reserving) lesson in Ratemaking. 20 min read, ~2,990 words.

Variable expenses scale with premium (commissions, premium taxes, licenses and fees); fixed expenses are flat dollars per exposure or policy (general expenses, some acquisition costs). Derive the provisions three ways: an all-variable ratio, a premium-based split by percent assumed fixed, and an exposure-based fixed dollar per exposure. Pure premium method...

What this lesson covers

• Content
• Example 1
• Example 2
• Example 3
• Example 4
• Example 5
• Common Mistakes
• Check Your Understanding
• Exam Shortcuts

Learning objectives

• A9

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