Investment Income, Underwriting Profit and Contingencies: Financial Models

The essence of an insurance policy is the promise by the insurer to pay all claims of the insured that are covered by the policy. In return for the insurer's promise, the insured pays the policy premium. The insurer can be partially described financially or economically by the set of all these policies. Before proceeding with a discussion of the use of investment income in ratemaking, allow me to fit our insurance transaction into a general economic or financial picture by a translation table of the key words in the description of the insurance policy. Investment Income, Profit Factor, Rate of Return, Econometric Modeling