Change in Net Premiums Written (IRIS)
Change in net premiums written is identified as the yearly percentage amendment in the net premiums being written. A particular company must express or show its ability to support controlled businesses development, together with quality surplus increase from the strong in-house capital generation.
In this phase, the corresponding ratio determines a particular company’s net retained percentage written preceding the reinsurance as ceded and assumed, in correlation to the surplus. The ratio also measures the business’ coverage to pricing errors in current books of business.
Insurance Regulatory Information System Ratios or IRIS
The IRIS system or Insurance Regulatory Information System was built up by the National Association of Insurance Commissioners (NAIC) with the intention and purpose of giving assistance primarily to state insurance sectors. It aims to place statutory mandates to watch over the financial circumstance of particular insurance companies presently operating in the respective states.
The IRIS system signifies thirteen industry ratios as well as to specify usual values on each and every ratio.
A departure from usual amounts on four or more of such ratios may lead into inquiries all over particular state insurance officers in particular with different aspects of one insurer’s business. In the year 2007, Tower Insurance Company of New York’s (TICNY) outcome is all in the usual value of amount for the 13 IRIS ratios. In that year, the Tower National Insurance Company’s (TNIC) all results are not within the normal values for 3 IRIS ratios but within the normal values for 10 IRIS ratios. The 3 IRIS ratios that were not inside the usual cost-charge are changes in the net premiums being written, gross agents’ balance to policy holder’s surplus, as well as liabilities into liquid assets.
Those ratios which were outside the normal cost-charge are caused by the increase of TNIC’s percentage as it had only been writing big business since year 2006. And for that, TNIC ceded eighty five percent of its percentage which resulted to the lowering of the policyholder’s surplus and an increase in liabilities for the balances to be paid. However, such may not change nor alter the gross agents’ balance. As an outcome to it, the ratio of liabilities into liquid assets, as well as the agents’ balances to policy holders’ surplus, are amplified.
The 2 IRIS ratios that are all outside the usual standards are net changed in the adjusted policy holder’s surplus and the one year reserve progress to policy holder’s surplus. Outside values are due to the restatement of loss and loss adjustment expenditure reserves wherein it is in conformity with the Statutory Accounting Principles (SAP) being recorded as an opening balance.
IRIS ratios, like the twelve financial ratios, are in the range of unusual values. There is a need of public knowledge to make it sure that such is not used in flag in-debt business companies. Positively, this may identify troubles and even assist companies in solving them. This phase may be used to prioritize companies on further studies to be done by financial examiners.