Reference no: EM132650281

Question - Assume the following:

a. Pinnacle Insurance Company is formed 6/30/18 with $12MM of capital (surplus).

b. Pinnacle sells one commercial insurance policy on 10/1/18 that provides 12 months of coverage, with premium of $10MM.

c. A $3MM claim occurs in October and is paid on 11/30/18.

d. Pinnacle learns of another claim that occurred in late December 2018, which it estimates will amount to $4MM, and will be paid in January 2019.

e. Expenses for the period 6/30 to 12/31/18 are $1.5MM

f. Pinnacle sells no more business in 2019.

g. Other (new) claims arise and are paid in 2019 for $3MM.

h. It appears by the end of 2019 that no more claims need be paid for this policy.

i. Expenses in 2018 are $2MM.

j. Investment income in year 2018 is $0 and in 2019 is $0.5MM

Required -

1. Compute Unearned Premium Reserve at the end of 2018.

2. Compute Loss (or Claim) Reserve at the end of 2018.

3. Compute Earned Premiums for 2018.

4. Compute Incurred Claims for 2018.

5. Compute Earnings for 2018.

6. Compute Surplus at the end of 2018.

7. Compute Unearned Premium Reserve at the end of 2019.

8. Compute Claim Reserve at the end of 2019.

9. Compute Earned Premiums for 2019.

10. Compute Incurred Claims for 2019.

11. Compute Earnings for 2019.

12. Compute Surplus at the end of 2019.