IRIS

Question 1

Equation and Normal range for GWP:PHS

Answer 1

Equation: GWP/PHS

Normal range: Less than 900%

Question 2

Factors to consider if Ratio 1 is unusual

Answer 2

• Compare to ratio 2
• LOB
• Profitability
• Direct vs assumed business

Question 3

Equation and normal range for NWP:PHS

Answer 3

Equation: NWP/PHS

Normal range: Less than 300%

Question 4

Factors to consider if ratio 2 is unusual

Answer 4

• If member of group or affiliates, what is the aggregate ratio?
• Profitability
• LOB
• Adequacy of reinsurance protection

Question 5

Equation and normal range for change in NWP

Answer 5

Equation: (Current NWP - Prior NWP)/Prior NWP

Normal range: between -33% and 33%

Question 6

Factors to look into if change in NWP ratio is unstable

Answer 6

• Are the assets properly valued & liquid enough to meet cash demands?
• Are the reserves adequate?

Question 7

Increased NWP does not necessarily mean there is a greater chance of insolvency, if it is accompanied by

Answer 7

• Low NWP: PHS ratio (ratio 2)
• Adequate reserving (ratios 11, 12, 13)
• Profitable operations (ratios 5)
• Stable product mix

Question 8

Equation and normal range for surplus aid: PHS

Answer 8

Equation: Surplus aid/PHS
Surplus aid = ceding commissions x sum of UEPR (non affiliates)
Normal range: Less than 15%

Question 9

Issues related to a high surplus aid ratio

Answer 9

• It may indicate that management believes that surplus is inadequate
• Surplus aid may improve the results of the other ratios to such a degree that it conceals important areas of concern

Question 10

Equation and normal range for 2 yr overall operation ratio

Answer 10

Equation: 2 yr loss ratio + 2 yr expense ratio + 2 yr investment ratio
Normal range: Less than 100%

Question 11

Equation and normal range for investment yield

Answer 11

Equation: -2 x Net investment income earned/cash & invested assets between current & prior years
Normal range: Between 3 & 6.5%

Question 12

Equation and normal range for gross change in PHS

Answer 12

Equation: change in PHS/ prior PHS

Normal range: between -10% and 50%

Question 13

Equation and normal range for change in adjusted PHS

Answer 13

Equation: Change in adjusted PHS/Prior PHS
Change in adjusted PHS = change in PHS - change in surplus notes - capital paid in - surplus paid in
Normal range: Between -10% and 25%

Question 14

Equation and normal range for adjusted liabilities: Liquid assets

Answer 14

Equation: Adjusted liabilities = Liabilities - Liabilities equal to deferred agent’s balances
Liquid assets = liquid assets - investments in parents, subsidiaries and affiliates
Normal range: Less than 100%

Question 15

Equation and normal range for gross agents balances: PHS

Answer 15

Equation: Gross agents balances in the course of collection/PHS
Normal range: Less than 40%

Question 16

Equation and normal range for 1 yr reserve development to PHS

Answer 16

Equation: one year reserve development/prior PHS

Normal range: Less than 20%

Question 17

Equation and normal range for estimated current reserve deficiency to PHS

Answer 17

Equation: Deficiency/PHS
Reserves required = premiums earned x ratio of reserves: premium
Normal range: Less than 25%