IRIS Ratios

Question 1

IRIS 1 Formula and Range

Answer 1

GWP / Surplus
Under 900%

Question 2

IRIS 2 Formula and Range

Answer 2

NWP / Surplus
Under 300%

Question 3

IRIS 3 Formula and Range

Answer 3

(CY NWP - PY NWP)/PY NWP
-33% to 33%

Question 4

IRIS 4 Formula and Range

Answer 4

Surplus Aid / Surplus
Surplus Aid = (Ceding Commissions + Contingent Ceding Commissions) / (Ceded Prems to affiliates and non-affiliates) * (Ceded UEP to non-affiliates)

Under 15%

Question 5

If IRIS 4 is unusual…

Answer 5

Recalc IRIS 1, 2, 7, 10, 13

Can be done by dividing by (1 - IRIS 4) except IRIS 7 (New Surp - Old Surplus - Aid) / Prior Surp

Question 6

IRIS 5 Formula and Range

Answer 6

2 year loss ratio + 2 year expense ratio - 2 year investment income ratio
Under 100%

2 yr Loss ratio = [Loss and LAE Inc + Dividends] / EP
2 Yr Expense Ratio = [Other U/W expenses - Other income] / WP
2 Yr Investment Income Ratio = Net Investment Income earned / EP

Question 7

IRIS 6 Formula and Range

Answer 7

(2 x NII Earned) / (Total Cash + Invested Assets CY & PY + Inv Inc Due & Accrued CY & PY - Borrowed Money CY & PY - NII Earned)

2% to 5.5%

Question 8

IRIS 7 Formula and Range

Answer 8

(CY Surplus - PY Surplus) / (PY Surplus)

-10% to 50%

Question 9

IRIS 8 Formula and Range

Answer 9

(Adj Surplus - PY Surplus) / (PY Surplus)
Adj Surplus = CY Surplus - Chng in Surplus Notes - Capital Paid in - Surplus Paid in

-10% to 25%

Question 10

IRIS 9 Formula and Range

Answer 10

[Total Liabilities - Deferred Agents Balance] / [ Bonds + Stocks + Cash & Short term investments + Recievables for securities + investment income due and accrued - investments in parents and affiliates]

Under 100%

Question 11

IRIS 10 Formula and Range

Answer 11

Gross Agents’ Balances in Collection / Surplus

Under 40%

Question 12

IRIS 11 Formula and Range

Answer 12

1 yr dev / PY Surplus

Under 20%

Question 13

IRIS 12 Formula and Range

Answer 13

2 yr dev / 2nd PY Surplus

Under 20%

Question 14

IRIS 13 Formula and Range

Answer 14

Est Reserve Deficiency / Surplus

Est Reserve Deficiency = avg(A,B) * CY EP - held reserves

A = (2yr dev + 2nd PY Reserves) / 2nd PY EP
B = (1yr dev + PY Reserves) / PY EP

Under 25%

Question 15

IRIS 1 Interpretation

Answer 15

High = more risk in relation to surplus
Surplus is cushion for absorbing losses

Question 16

IRIS 2 Interpretation

Answer 16

High = more risk in relation to surplus
Surplus is cushion for absorbing losses
Stricter unusual range than IRIS 1

Question 17

IRIS 3 Interpretation

Answer 17

High or low = potential lack of stability in operations
High = less strict UW req. or new line

Question 18

IRIS 4 Interpretation

Answer 18

High = surplus may be inadequate

Question 19

IRIS 5 Interpretation

Answer 19

Assesses profitability, low = better operating profit

Question 20

IRIS 6 Interpretation

Answer 20

Low = multiple potential causes (ex: investments providing capital gains but no interim income)
High = investments are high risk

Question 21

IRIS 7 Interpretation

Answer 21

Low = dangerous surplus decrease (may be by net income drop)
High = possible insolvency (surplus often goes up before insolvency)

Question 22

IRIS 8 Interpretation

Answer 22

Low(High) = deterioration (improvement) in financial condition due to operations

Question 23

IRIS 9 Interpretation

Answer 23

High = trouble meeting short-term obligations

Question 24

IRIS 10 Interpretation

Answer 24

High = agents may be slow paying

Question 25

IRIS 11 and 12 Interpreation

Answer 25

Positive (negative) = reserve deficiency (redundancy)

Question 26

IRIS 13 Interpretation

Answer 26

Positive (negative) = reserve deficiency (redundancy) - affected by changes in mix and prem volume - good test for correction of reserve deficiencies