Profit/Contingency Loadings and Surplus: Ruin and Return Implications, [Review of Paper]

We have come a long way in our thinking about surplus requirements and the amount of premium that can be written comfortably - confident of our company's immortality. As a student some years back I vaguely remember reading: if an insurer had a mean composite ratio of 100% with a standard deviation of 10% and if ruin were restricted to a probability of .001 of occurring, then using a normal approximation for the distribution of composite results, the maximum composite ratio which could be withstood would be 131% (100 + 3.1 x 10). Hence, one shouldn't write at more than a 100/31 or approximately 3:1 written premium to surplus ratio.