Rate Adequacy Assessment

You are an actuarial analyst. Evaluate the rate adequacy of the following book of business based on recent loss experience.

PASTE THE FOLLOWING:
{{loss_and_premium_data_by_accident_year_e}}
{{current_filed_rates_and_the_effective_da}}
{{loss_development_factors_and_trend_assum}}
{{target_combined_ratio_or_profit_margin}}

YOUR TASK:
1. Calculate the loss ratio and combined ratio by accident year
2. Apply development factors to project ultimate losses for immature years
3. Calculate the indicated rate change needed to achieve the target combined ratio
4. Compare the indicated change to the currently filed rates and express the adequacy gap
5. Write a one-page actuarial summary of rate adequacy findings suitable for management review

OUTPUT: {loss_and_combined_ratios, ultimate_loss_projections, indicated_rate_change, rate_adequacy_gap, management_summary}

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Why this works

Ultimate loss projection rather than current incurred loss prevents under-stating the adequacy need in immature accident years, which is the most common actuarial oversight in rate reviews.

Risks & review

Rate adequacy conclusions are sensitive to development factor and trend assumptions. Document and disclose all assumptions in the summary to enable management to assess sensitivity.