TRIP Portfolio Management & Strategy 3

Question 1

A transportation insurer reports a combined ratio of 112% for its trucking liability line. What does this indicate?

Accepted Answer

Losses and expenses exceed premiums collected, resulting in an underwriting loss

Answer

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.

Question 2

In transportation liability lines, which factor most commonly causes loss development to extend over many years compared to property cargo lines?

Accepted Answer

Liability claims involving bodily injury often take years to litigate and settle

Answer

Bodily injury liability claims, including truck accidents, frequently involve prolonged litigation, medical treatment, and appeals, creating long development tails.

Question 3

During a soft market cycle in commercial auto insurance, a prudent portfolio strategy is to:

Accepted Answer

Maintain underwriting discipline and accept reduced volume rather than compromise pricing adequacy

Answer

Maintaining underwriting discipline in soft markets prevents writing unprofitable business that produces adverse development when losses emerge.

Question 4

IBNR (Incurred But Not Reported) reserves are particularly important in transportation insurance because:

Accepted Answer

Many transportation claims—especially cargo damage and injury—are reported months or years after the incident

Answer

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.

Question 5

A transportation insurer reviews its loss ratio trend and finds deterioration driven by nuclear verdicts against trucking companies. The BEST portfolio response is to:

Accepted Answer

Re-evaluate risk selection criteria, pricing adequacy, and policy limits offered for the trucking segment

Answer

A systematic loss ratio deterioration from social inflation requires a coordinated underwriting and pricing review, not portfolio elimination or unrelated coverage adjustments.

(TRIP) Transportation Risk and Insurance Professional Practice Test

(TRIP) Transportation Risk and Insurance Professional Practice Test

TRIP Portfolio Management & Strategy 3