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Foundations of Casualty Actuarial Science
So,
R= P + F
I-V-Q
Where
R = rate per unit of exposure
P = pure premium
F = fixed expense per exposure
V = variable expense factor
Q = profit and contingencies factor
h) Premium - Application of the rates to the individual
exposures to be covered by an insurance policy produces
the premium for that policy. Like exposure, premium
can be written, earned, or in force.
i) Loss Ratio - The most widely used statistic in the
analysis of insurance losses is the loss ratio, or losses
divided by premium. There is a great difference between
a loss ratio based upon paid losses as of accident year
age 12 and written premium and one that is based upon
ultimate incurred loss and loss adjustment expenses and
earned premium, although either can be properly referred
to as a loss ratio.
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