CAS Exam 5 Spring 2013, Question 26
Study guide: Exam 5
An actuary is conducting a reserve review for a line of business and calculates the following:
| Claims as of 12/31/2012 | Projected Ultimate Claims | |||||||
|---|---|---|---|---|---|---|---|---|
| Accident Year | Reported | Paid | Development — Reported | Development — Paid | BF — Reported | BF — Paid | Claim Count and Severity Technique | Disposal Rate Technique |
| 2009 | $76,700 | $75,800 | $77,501 | $77,483 | $77,758 | $78,022 | $77,474 | $77,817 |
| 2010 | $104,000 | $98,100 | $113,782 | $113,828 | $113,374 | $113,165 | $112,669 | $106,363 |
| 2011 | $107,200 | $55,100 | $130,379 | $94,770 | $127,393 | $102,646 | $132,743 | $107,447 |
| 2012 | $58,100 | $20,400 | $120,014 | $89,600 | $121,397 | $115,159 | $123,383 | $93,012 |
Part a (1.5 points)
Suggest a reason for the disparity between the estimates of ultimate claims for accident year 2011 and propose diagnostic tests that would verify the assumption.
Part b (0.5 points)
Determine what steps the actuary should take to determine the most appropriate methodology to project ultimate claims for accident year 2011.
Answer this question and see the worked solution