Which of the following defines excessive growth, per the threshold?

Prepare for the CAS Exam 6 with detailed study materials. Use flashcards and multiple-choice questions, each with hints and explanations, to get exam-ready!

Multiple Choice

Which of the following defines excessive growth, per the threshold?

The idea here is to use a stable, rolling measure of growth that reduces the impact of one-off spikes. Excessive growth is defined by taking the year-over-year growth rates in GWP over a 3-year window, averaging them, but with a twist: any single year’s growth is capped at 40% before averaging. If that 3-year average (after applying the cap) exceeds 10%, the growth is considered excessive. Why this is the best choice: it uses a 3-year horizon to smooth short-term volatility, includes a cap to prevent a single exceptional year from skewing the average, and sets a clear threshold of 10% for what counts as excessive. The other options don’t fit this exact rule — they use different time windows or omit the cap or set different thresholds, so they wouldn’t match the specified definition.

The idea here is to use a stable, rolling measure of growth that reduces the impact of one-off spikes. Excessive growth is defined by taking the year-over-year growth rates in GWP over a 3-year window, averaging them, but with a twist: any single year’s growth is capped at 40% before averaging. If that 3-year average (after applying the cap) exceeds 10%, the growth is considered excessive.

Why this is the best choice: it uses a 3-year horizon to smooth short-term volatility, includes a cap to prevent a single exceptional year from skewing the average, and sets a clear threshold of 10% for what counts as excessive. The other options don’t fit this exact rule — they use different time windows or omit the cap or set different thresholds, so they wouldn’t match the specified definition.

More practice questions