Portfolio Management & Strategy Flashcards
7 cards from real TRIP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Portfolio Management & Strategy flashcards as text
A transportation insurer reports a combined ratio of 112% for its trucking liability line. What does this indicate?
Answer: Losses and expenses exceed premiums collected, resulting in an underwriting loss
A combined ratio above 100% means the insurer is paying out more in losses and expenses than it collects in premium, producing an underwriting loss.
In transportation liability lines, which factor most commonly causes loss development to extend over many years compared to property cargo lines?
Answer: Liability claims involving bodily injury often take years to litigate and settle
Bodily injury liability claims, including truck accidents, frequently involve prolonged litigation, medical treatment, and appeals, creating long development tails.
During a soft market cycle in commercial auto insurance, a prudent portfolio strategy is to:
Answer: Maintain underwriting discipline and accept reduced volume rather than compromise pricing adequacy
Maintaining underwriting discipline in soft markets prevents writing unprofitable business that produces adverse development when losses emerge.
IBNR (Incurred But Not Reported) reserves are particularly important in transportation insurance because:
Answer: Many transportation claims—especially cargo damage and injury—are reported months or years after the incident
The delay between a loss event and formal claim reporting—common in cargo damage and bodily injury—requires IBNR reserves to accurately reflect ultimate liability.
A transportation insurer reviews its loss ratio trend and finds deterioration driven by nuclear verdicts against trucking companies. The BEST portfolio response is to:
Answer: Re-evaluate risk selection criteria, pricing adequacy, and policy limits offered for the trucking segment
A systematic loss ratio deterioration from social inflation requires a coordinated underwriting and pricing review, not portfolio elimination or unrelated coverage adjustments.
Premium-to-surplus ratio is used in insurance portfolio management primarily to measure:
Answer: The insurer's financial leverage and capacity to absorb unexpected losses relative to capital
Premium-to-surplus ratio indicates how much business is written relative to the insurer's capital base, serving as a leverage and solvency measure.
Rate adequacy testing in a transportation portfolio involves comparing:
Answer: Filed rates to actuarially indicated rates based on loss and expense experience
Rate adequacy testing compares what is being charged to what actuarial analysis says should be charged to achieve target profitability.