CAS Exam 5 Spring 2013, Question 25
Study guide: Exam 5
Given the following information for a portfolio written on a claims-made policy form:
| Calendar Year | Paid ULAE | Paid Claims | Year-End Outstanding Case Reserve | Year-End Outstanding IBNR |
|---|---|---|---|---|
| 2009 | $409 | $3,625 | $7,575 | $6,250 |
| 2010 | $476 | $5,875 | $10,450 | $7,500 |
| 2011 | $614 | $7,950 | $13,750 | $8,750 |
| 2012 | $761 | $10,375 | $16,500 | $10,625 |
Claim amounts include ALAE.
Part a (1.5 points)
Calculate a ULAE provision as of December 31, 2012 using the Kittel adjustment.
Part b (0.5 points)
Explain the purpose of the Kittel adjustment.
Part c (0.25 points)
Briefly explain a shortcoming of the classical method that is not addressed by the Kittel adjustment.
Answer this question and see the worked solution