2018 Fall 20.c

ThrowGrowThrowGrow
in CIA.FCT

Hi, part (c) in examiner reports says one common error is that "Identifying an incorrect event such as “rapid growth".
There is increase in both claims and assets. Can you help me understand why rapid growth is not incorrect?

This is my answer to part (c). Let me know what do you think. Thanks!

My answer to (c): Claims and Expenses and Assets are both higher in the adverse scenario. Aggressive underwriting can lead to that results with underwriting more risky contracts

https://battleactsmain.ca/pdf/Exam_(2018_2-Fall)/(2018_2-Fall)_(20).pdf

Comments

  • AnLaPeAnLaPe

    I think rapid growth can be ruled out because net earned premium is the same under the base and stressed scenarios.

    This being said, I'm not sure what kind of ripple effect could cause the assets to increase in this scenario... Maybe increased investment income from the larger reserves?

  • Staff-T1Staff-T1

    Possibly increased investment income and perhaps also increased reinsurance receivables

  • ThrowGrowThrowGrow

    Thank you @AnLaPe. The observation of unchanged net earned premium is really helpful!

    Thanks @Staff-T1 as well!

Sign In or Register to comment.