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Foundations of Casualty Actuarial Science
F = fixed expense per exposure
V = variable expense factor
Q = profit and contingencies factor
9. Concept of Loss Ratio Method
R = AR0
Where
R = indicated rate
R0 = current rate
A = adjustment factor = W / T
W = experience loss ratio
T = target loss ratio
Looking first at the target loss ratio :
T=1-V-Q
1+G
Where
V = premium-related expense factor
Q = profit and contingencies factor
G = ratio of non-premium-related expenses to losses
And, then the experience loss ratio : 285
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