reinsurance load

HateExams99HateExams99
in Chev.Agric

Hi,

What is the correct definition to reinsurance load?
2018 Fall 12 (b) says "to account reinsurance costs when province purchases private insurance";
Battle Card #8 states "to account reinsurance costs when province purchases REinsurance".

Would you please confirm?

Thanks!

Comments

  • Staff-T1Staff-T1

    Probably a typo on the CAS sample solutions. The BattleCard is the right one

  • FoTheGreatFoTheGreat
    edited April 19

    Question here - not sure if it's quite related, but a question on PPA from 2015 Fall a.i) says reinsurance cost should not be considered into the price charged to insured. Is there a conflict here, or is PPA and Agriculture insurance is just totally uncomparable? In general, do you account for reins in the rate?

  • Staff-TSStaff-TS

    For FSCO.PPA, it mentions that when performing an indication, direct losses (i.e., prior to any reinsurance transactions) should be the basis for ratemaking. Similarly, premium metrics should be used without consideration for reinsurance. So indications would be gross of any reinsurance considerations for the purpose of the FSCO filing, at the time these guidelines were effective.*

    The Chev.Agri paper does include considerations for reinsurance costs in the premium charged. I would take this at face value for the purposes of writing the exam. See the note below for additional details.

    '* NOT TESTABLE: I was curious, and pursued further: In my experience, rates charged in PPA do usually account for reinsurance in some way. Werner Modlin (exam 5 textbook) mentions that at the time of writing, indications gross of reinsurance were standard, but performing them net of reinsurance was becoming more common.

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