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Nut
05-03-2011, 05:35 PM
I noticed one of the TIA solutions used

"Projected Fixed Expense per exposure (with trend)" / "Projected Trended Premium at Current Rate Level."

While I think this removes the trend and rate bias, I "think" we can just take

Fixed Expense Prov = "Fixed Expenses / Premium" -- at least from what I read from Werner page 135. Is this correct?

I'm confused because I have seen solutions go both ways. In the appendix, pg A-21 of Werner, they just take Fix Expense/Premium. Same with TIA Quiz 6#1 (although there was enough info to do it the other way using trending and on-level premiums). And, in the TIA Quiz 10 Q1, they project the Fixed expense (as would in the Exposure based method) and then divide it by the Projected on-level trended premium.

Many Thanks for the last second clarification!

JasonScandopolous
05-03-2011, 06:06 PM
I noticed one of the TIA solutions used

"Projected Fixed Expense per exposure (with trend)" / "Projected Trended Premium at Current Rate Level."

While I think this removes the trend and rate bias, I "think" we can just take

Fixed Expense Prov = "Fixed Expenses / Premium" -- at least from what I read from Werner page 135. Is this correct?

I'm confused because I have seen solutions go both ways. In the appendix, pg A-21 of Werner, they just take Fix Expense/Premium. Same with TIA Quiz 6#1 (although there was enough info to do it the other way using trending and on-level premiums). And, in the TIA Quiz 10 Q1, they project the Fixed expense (as would in the Exposure based method) and then divide it by the Projected on-level trended premium.

Many Thanks for the last second clarification!

the first thing you quoted is the policy/exposure based projection method, converted into a % of premium (this is in W&M as well, maybe 2-3 pages after opage 135). The second one, and what was used in appendix A, is the premium based projection method.

Nut
05-03-2011, 08:56 PM
Thanks, but Werner says Werner says on page 135 "However, some companies trend the fixed expense ratio, which implies that average fixed expenses are changing at a different rate than average premium. For the purpose of this text, the fixed expense provision calculated using that methodology is not trended."

Hence, I probably won't trend fixed expenses or used on-level trended premium to calc the Fixed Expense provision, unless it is specifically requested to do that.