Question

Please include calculations and labels, thank you!!

ICG Insurance (ICGI) company reported the following information on its accounting statements last year:

      Premiums Written                $90,000,000

      Loss Adjustment Expenses     $5,000,000

      Underwriting Expenses        $30,000,000

      Premiums Earned               $100,000,000

      Incurred Losses                     $70,000,000

Briefly explain your answers.

1. What was ICGI's loss ratio last year?
2. What was ICGI's expense ratio last year?
3. What was ICGI's combined ratio last year?
4. ICGI calculated its pure premium to be $280 for a risk they were considering insuring. What is the gross rate for this risk, assuming a 30 percent expense ratio?
5. Based on accounting statement information above, what is the ICGI’s gross rate risk for its entire portfolio if its expense ratio for its book of business is 20%?

Answer 1

1.Loss Ratio:Incurred Losses+Loss Adjustment expense/Premium Earned*100

: 70000000+5000000/100000000

: 75000000

:75%

2.Expense Ratio:Underwritingexpense/Premium Written

Expense Ratio : 30000000/90000000*100

:33.33%

3.Combined Ratio=Incurred losses+Loss Adjustment Expense+Expenses/Premium Earned

=70000000+5000000+30000000/100000000*100

=105000000/100000000

=105%.

4.PURE PREMIUM=$280

Expense Ratio=30%

Gross Premium or Gross Rate=Pure Premium/1-Expense Ratio

=280/1-30%

=280/70%

=$400

5. Pure Premium=Incurred Losses+Loss Adjustment Expense

=70000000+5000000

=75000000

Expense Ratio=20%(given)

Gross Rate= Pure Premium/1-Expense Ratio

=75000000/1-20%

=75000000/80%

=$93750000

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