For what it's worth, I allocate by reserves on a company wide basis for all
states ex. Washington. For the state of Washington, I go deeper and
allocate based on WA's reserves. My WA model is not by choice, the WA DOI
has companies allocate based on their WA reserves.
Charlie
----------
From: Sebastian Tan <sebtan@singnet.com.sg>
To: Discussion <casnet@lists.casact.org>
Subject: Allocation of Surplus to individual lines
Date: Friday, June 19, 1998 12:44 AM
It is common for actuaries to price their products to achieve a particular
return on equity (or surplus). However this requires a notional allocation
of surplus to individual lines of business. This is still a controversial
topic. It would be interesting to know what is currently practised in the
insurance industries in the USA, UK, Canada and Australia. If you are
currently involved in premium rating, I hope you would share your
experiences:
Do you use a simple approach (in proportion to premiums or reserves) in the
allocation process or do you use something along the lines of Risk-Based
capital or some other approach?
Thanks in advance,
Sebastian
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