CAS Exam 5 Fall 2013, Question 6
Study guide: Exam 5
Given the following information:
- All policies have six-month terms.
- New rates will take effect on January 1, 2014.
- Rates will be in effect for one year.
- Selected frequency trend = 0%.
- Selected severity trend = +5%.
- Selected ULAE provision = 10% of loss and ALAE.
- Two accident years with equal weights are used to calculate the pure premium.
- Assume no further development after 36 months.
Cumulative Paid Loss and ALAE ($000s):
| Accident Year | 12 Months | 24 Months | 36 Months |
|---|---|---|---|
| 2009 | $6,000 | $17,200 | $25,800 |
| 2010 | $4,500 | $12,200 | |
| 2011 | $7,900 |
Open Claim Counts:
| Accident Year | 12 Months | 24 Months | 36 Months |
|---|---|---|---|
| 2009 | 190 | 160 | 75 |
| 2010 | 120 | 110 | |
| 2011 | 165 |
Outstanding Case Loss and ALAE Reserves ($000s):
| Accident Year | 12 Months | 24 Months | 36 Months |
|---|---|---|---|
| 2009 | $16,500 | $13,000 | $5,500 |
| 2010 | $10,000 | $6,500 | |
| 2011 | $9,000 |
Earned Exposures (000s):
| Calendar Year | Earned Exposures (000s) |
|---|---|
| 2010 | 200 |
| 2011 | 300 |
Use the Berquist-Sherman case outstanding adjustment technique to calculate the projected ultimate loss and LAE pure premium of the rate level indication.
Part a (3.25 points)
Answer this question and see the worked solution