RMIN4000 Final Exam Brown Questions
and Answers | Latest Update | 2024/2025
| 100% Verified
How do you calculate the total premium if the expected loss is $50,000, administrative costs are
$10,000, and the desired profit margin is 15%?
✔✔ Total premium = Expected loss + Administrative costs + (Expected loss + Administrative
costs) × Profit margin
✔✔ Total premium = $50,000 + $10,000 + ($50,000 + $10,000) × 0.15
✔✔ Total premium = $60,000 + $9,000
✔✔ Total premium = $69,000
What is the reserve amount needed if the expected future claims are $200,000 and the estimated
claims handling expenses are $30,000?
✔✔ Reserve amount = Expected future claims + Claims handling expenses
✔✔ Reserve amount = $200,000 + $30,000
✔✔ Reserve amount = $230,000
Calculate the loss frequency if there are 120 loss events and 1,500 total exposures.
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,✔✔ Loss frequency = Number of loss events / Total exposures
✔✔ Loss frequency = ,500
✔✔ Loss frequency = 0.08 or 8%
Determine the average loss severity if the total loss amount is $250,000 and there are 50 loss
events.
✔✔ Average loss severity = Total loss amount / Number of loss events
✔✔ Average loss severity = $250,
✔✔ Average loss severity = $5,000
If the risk load is set at 10% and the expected loss is $40,000, what is the total premium
including risk load?
✔✔ Risk load amount = Expected loss × Risk load percentage
✔✔ Risk load amount = $40,000 × 0.10
✔✔ Risk load amount = $4,000
✔✔ Total premium = Expected loss + Risk load amount
✔✔ Total premium = $40,000 + $4,000
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,✔✔ Total premium = $44,000
Calculate the loss ratio if the total incurred losses are $300,000 and the total earned premiums
are $1,000,000.
✔✔ Loss ratio = Total incurred losses / Total earned premiums
✔✔ Loss ratio = $300,000 / $1,000,000
✔✔ Loss ratio = 0.30 or 30%
What is the required reserve if the probability of future claims is 75% and the estimated amount
of future claims is $150,000?
✔✔ Required reserve = Probability of claims × Estimated amount of future claims
✔✔ Required reserve = 0.75 × $150,000
✔✔ Required reserve = $112,500
If the expected loss is $75,000 and the administrative costs are $20,000, calculate the premium if
the profit margin is 10%.
✔✔ Total premium = Expected loss + Administrative costs + (Expected loss + Administrative
costs) × Profit margin
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, ✔✔ Total premium = $75,000 + $20,000 + ($75,000 + $20,000) × 0.10
✔✔ Total premium = $95,000 + $9,500
✔✔ Total premium = $104,500
Determine the total reserve needed if future claims are estimated to be $500,000 and claims
handling expenses are $50,000, and the reserve should include an additional 5% buffer.
✔✔ Reserve amount = Future claims + Claims handling expenses
✔✔ Reserve amount = $500,000 + $50,000
✔✔ Reserve amount = $550,000
✔✔ Buffer amount = Reserve amount × Buffer percentage
✔✔ Buffer amount = $550,000 × 0.05
✔✔ Buffer amount = $27,500
✔✔ Total reserve = Reserve amount + Buffer amount
✔✔ Total reserve = $550,000 + $27,500
✔✔ Total reserve = $577,500
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