Risk Adjusted Premiums

while insurers smaller (larger) than need higher (lower) Portfolio Risk Adjusted Premiums to compensate for their higher probabilities of excessive Claims Costs:

This analysis will show that when transfers its Claims Costs to other insurers, smaller insurers need payments that exceed 85% of 's Earned Premiums, guaranteeing Operating Losses for . Larger insurers can accept less than 85% of 's Earned Premiums, guaranteeing certain profits. This happens because larger insurers are more efficient than and all smaller insurers.

Insurer's Portfolio Risk Adjusted Premiums () adjust for the fact that small insurers have higher probabilities of PLRE's above 1, 2, 3, 4 standard errors above the PLR than and larger insurers. To earn profits of 5%, or simply to avoid losses, with the same probability as , they need additional payments, or additional Surplus, to cushion them from these Claims Costs. If transfer its Claims Costs portfolio to larger insurers the transaction can benefit both parties (See Section 13, but if transfers its portfolio to and , at least one party is harmed. Risk assuming health care providers like and , are, *almost always*, going to need higher Portfolio Size Adjusted Risk Premiums than can provide without incurring Operating Losses or becoming insolvent.

- Portfolio Risk Adjusted Premiums - Matching PI's Profit Probabilities
- Portfolio Risk Adjusted Premiums - Matching PI's Loss Avoidance Probabilities