Fall 2018 #25 - Excessive Growth
For letter a), we need to add some margin for excess growth. I'm not sure how to get the same amount than in the report. Actually there is two elements I don't understand. Unfortunately this part of the calculation is not explicite (that probably means my question is just so stupid).
First, what is exactly the Gross Premium? I assumed at first that it was simple the Direct Premium, but when using it, I get an answer a bit higher (12 528).
I tried to use Direct + Assumed instead, without using Ceded (since it is Gross Premium) but once again, I don't get it right.
Second, why is the risk factor of 0.025 applied twice in the formula for the margin for excessive growth. And by twice I don't mean 0.025x2 (to account for the normal margin and to account for the margin for excessive). In the formula, it is litterally 0.025x0.025xExcessive Growth. Was it intentional?
Thank you!
Comments
Gross is direct + assumed.
It is a typo on the CAS side. It should be 0.025(7500 + 20000 + growth above 20%)
where growth above 20% is 13000 -> 325000(1-1.2/1.25)
You will get the answer in the sample if you do this