Question

Mutual Property Insurance Company has a surplus of $2 million. According to a conservative rule, how much new net premiums can Mutual Property Insurance Company safely?

Answer 1

Mutual Property Insurance Company can safely write new net premiums of $20 million.

Step-by-step explanation:

The conservative rule in insurance is that an insurance company should have a surplus of at least 10% of its net premiums written. In the case of Mutual Property Insurance Company, with a surplus of $2 million, they can safely write new net premiums of $20 million. This is because 10% of $20 million is $2 million, which matches their surplus. Therefore, Mutual Property Insurance Company can safely write new net premiums of $20 million.