Operational Risk Calculation
One of the components in the operational risk margin formula is the direct premiums received in the past 12 months for insurance contracts issued. In the past exam problems, for example Spring 2019 Q13, the direct written premium is given. I was wondering suppose the question gives both written premium and earned premium, should we use earned premium instead? The "direct premium received" part of the definition sounds like it's referring to the earned premium.
Comments
No, you should use written premium if that is the case. Direct premium more closely ties to written premium. Direct premium is all the premium you have written, not including those premiums assumed through reinsurance from other insurers or reinsurers