CAS Exam 5 Fall 2013, Question 19
Study guide: Exam 5
Within the last year, an insurer implemented a new claims processing system that resulted in faster payment of claims. However, the claims department failed to communicate this change to the actuarial department, and the actuary continues to use the paid loss development method to select the insurer's ultimate losses.
For each item below, discuss the impact of using the actuary's calculation of ultimate losses on the following estimates.
Part a (0.5 points)
Ultimate ALAE calculated using a paid ALAE to paid claims ratio method.
Part b (0.5 points)
Ultimate ULAE calculated using the Wendy Johnson method.
Part c (0.5 points)
Rates calculated for the upcoming policy year using the pure premium method.
Part d (0.5 points)
The reinsurance recoverable for the underlying business on an excess-of-loss reinsurance contract where the retention has been exceeded but the limit has not yet been exhausted.
Answer this question and see the worked solution
Concepts tested
- Loss Reserving
- Unallocated Loss Adjustment Expenses ULAE
- Loss and Loss Adjustment Expense
- Claims Processing Changes
- Allocated Loss Adjustment Expense
- Reinsurance Recovery