Re[2]: Table M calculation

Jennifer_Middough@mercer.com
Wed, 15 Jul 1998 16:10:37 -0500

Below is my response to the individual who posted this question on
CASNET:




The preface to the Table of Insurance Charges states that:

"Whenever the last charge in any column is .000, it is to be continued
on for all higher entry ratios"

As a result, one cannot assume that the charge at an entry ratio of
3.50 is zero since the charge at the highest entry ratio (which is
3.00) in the table is non-zero. Therefore, there must be a non-zero
charge for an entry ratio of 3.50.

By examining the charges for expected loss group 42, it appears that
the charge is decreasing by .006-.007 for every .1 increase in the
entry ratio. By interpolation, this would result in a charge at an
entry ratio of 3.5 of roughly .123 (.153-.006*(3.5-3.0)). Your
resulting insurance charge would be:

.123-.031 = .092 which is greater than the .05 you referred to in
your e-mail.

I hope this helps.

Thanks for giving me a kick in the pants to start studying for Part 9

Jennifer Middough
William M. Mercer, Inc.
2 World Trade Center
New York, NY 10048
Ph (212) 345-2220

______________________________ Reply Separator _________________________________
Subject: Re: Table M calculation
Author: "Gwendolyn L. Anderson" <Gwendolyn_L._Anderson@ffic.com> at uucp
Date: 7/15/98 12:49 PM

Would you please share what reading this question is from? For those of us who
are not as familiar with the syllabus, there appears to be more than one
possibility.





hburrus@idrwc.com on 07/02/98 02:06:23 PM
To: studygroup9@lists.casact.org @ INTERNET
cc: (bcc: Gwendolyn L. Anderson)
Subject: Table M calculation

I put this up on Casnet, but it fits here as well...


What is the most actuarially sound procedure for calculating the
appropriate table M charge when the required insurance charges "fall off"
the chart?

For example:
Expected loss group=42
Value difference=0.80
Entry Difference = 3.50

Since Table M only shows entry ratios up to 3.00, one must interpolate
beyond that point. When entry ratios approach 3.00, the insurance charge
approaches zero. In cases like this I have been assuming that insurance
charges with entry ratios above 3.00 are zero and end up with the following
results:

Minimum Entry Ratio = .23
Maximum Entry Ratio = 3.73
Savings = .031
Charge = .000
Insurance Charge = -.031

But does this make a whole lot of sense? This insured has expected losses
of approximately $170k. The maximum premium factor for this insured was
approximately 4. We know from our NCCI ELF tables that an ELF for an
accident limitation of $610k ($170k * 4 = $610k) can be in the neighborhood
of 0.05. That leads me to believe that the insurance charge for this policy
limitation should be at least 0.05 (since several accidents may combine to
push the policy losses over $610k). However I am getting no charge due to
this maximum premium factor.

What am I missing?

--Hayden Burrus
Insurance Data Resources
5200 Town Center Circle
Suite 500
Boca Raton, FL 33486