General Insurance and Reinsurance: Pricing, Reserves, Reinsurance Programmes

Course 3B of the Association's actuarial programme is the applied work of an actuary in general insurance: pricing, claims reserves and reinsurance programmes. The course leads from data and the fundamental insurance equation through trends, risk classification and generalised linear models to development triangles, the Chain-Ladder and Bornhuetter–Ferguson methods, reserve uncertainty and reinsurance design. It concludes with a comprehensive case study carried out in a spreadsheet.

Course programme

1. Data and exposure bases in ratemaking — exposure, written and earned premium, accident years and calendar years.
2. The fundamental insurance equation — pure premium method and loss ratio method, indicated rate change.
3. Trends, loss development and premium at current rate level — exponential trend, parallelogram method.
4. Risk classification and rate differentiation — rating factors, relativities, minimum bias method.
5. Generalised linear models for ratemaking — Poisson, gamma, Tweedie, exposure as an offset, significance of factors.
6. Data structure for reserving — paid and incurred loss triangles, diagnostics.
7. Loss development method (Chain-Ladder) — development factors, tail, ultimate losses and reserve.
8. Expected loss ratio method and Bornhuetter–Ferguson method — choosing the method by accident year.
9. Frequency-severity method and special reserving methods — average unpaid claim, claims handling expenses, subrogation.
10. Reserve uncertainty and ranges — Mack model, bootstrap, IFRS 17 risk adjustment.
11. Types of reinsurance and cash flow calculation — surplus, per-risk and per-event layers, reinstatement of cover.
12. Designing a reinsurance programme — retention, experience rating and exposure rating, capital relief.
13. Comprehensive computer case study — pricing, reserving and reinsurance for a hypothetical company in a spreadsheet.

Each lesson comes with notes containing a table of notation, a worked example and practice problems, plus a lesson test. The course final test consists of 45 tasks, including problems based on a common data set; ASAB certificate.

Duration: 13 video lessons, 3 h 16 min of video + lesson tests and a final test.