GK
INSURANCE AWARENESS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A section of the risk-based capital formula calculating requirements for reserves and premiums is termed as ____
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Underwriter
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Underwriting Risk
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Universal Life Insurance
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Unauthorized Reinsurance
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Explanation:
Detailed explanation-1: -C1 is asset risk; essentially, asset default risk. C3 is interest rate risk. C2 is pricing risk, and C4 is general business risk. You can see that this formula creates what is commonly referred to in the industry as a covariance between the C1, C2, and C3 components.
Detailed explanation-2: -Underwriting risk is the risk of loss borne by an underwriter. In insurance, underwriting risk may arise from an inaccurate assessment of the risks associated with writing an insurance policy or from uncontrollable factors. As a result, the insurer’s costs may significantly exceed earned premiums.
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