The Two Major Components of Expense Risk for P&C Insurers

question 48

Multiple Choice

The two major components of expense risk for P&C insurers are

• A) the combined ratio and the premium ratio.
• B) loss adjustment expenses and variations in commission and other expenses.
• C) investment yield and premiums earned.
• D) dividend ratio and investment yield.
• E) none of the above

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Definitions:

Production Units

Refers to the quantifiable outputs or goods produced by a manufacturing process or facility.

Master Budget

The master budget is a comprehensive financial planning document that consolidates all of a company's individual budgets, outlining its financial goals and plans.

Merchandising Company

A type of business that purchases finished goods for resale, making profits by selling these products at higher prices than their purchase costs.

Purchases Budget

A financial plan that estimates the cost and amount of goods or materials a company needs to buy over a specific period to meet its operational goals.