Page 174 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 8: Accounting for Insurance Companies

Gross WP/Surplus 67% 93% notes
Net WP/Surplus 67% 73%

Gross Loss Res./Surpl. 50% 75%
Net Loss Res./Surpl. 50% 55%
Ceded balances/Surplus 0% 30%
Illustration 2: ABC I insurance Company Impact of Catastrophe Protection Treaty

No Cat. event Yes Cat. Event
Balance Sheet
Without With Without With
Assets
Bonds 2,575 2,525 2,480 2,430
Cash 75 75 120 120
Agents Balances 100 100 100 100
Total 2,750 2,700 2,700 2,650

Liabilities
Loss Reserves Gross 750 750 1,200 1,200
Cede 0 0 0 400
Net 750 750 1,200 800

Unearned Premium Gross 500 500 500 500
Cede 0 0 0 0
Net 500 500 500 500

Ceded Agts. Balances 0 0 0 20
Total 1,250 1,250 1,700 1,320
surplus 1,500 1,450 1,000 1,330
Income Statement (net of reinsurance)
Earned Premium 1,000 950 1,000 930
Incurred Losses 750 750 1,250 850
Expenses 200 200 200 200
Underwriting Income 50 0 -450 -120

Investment Income 133 130 130 128
Total income 183 130 -320 8
Other Financial Statistics

Written Premium Gross 1,000 1,000 1,000 1,000
Cede 0 50 0 70
Net 1,000 950 1,000 930
Gross WP/Surplus 67% 69% 100% 75%
Net WP/Surplus 67% 66% 100% 70%

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