CAS Exam 5 Spring 2013, Question 4
Study guide: Exam 5
Given the following information:
- Annual loss trend rate = +4%.
- Rate change history:
- +3% effective April 1, 2009.
- +2% effective July 1, 2010.
- All policies have annual terms.
- Calendar year 2012 earned premium = $50,000.
- Accident year 2012 reported losses at December 31, 2012 = $4,200.
| Percentage of Loss Reported at: | |
|---|---|
| 12 months | 10% |
| 24 months | 35% |
| 36 months | 65% |
| Selected Ultimate Loss Ratio | |
|---|---|
| Accident Year 2009 | 66% |
| Accident Year 2010 | 67% |
| Accident Year 2011 | 70% |
Use the reported Bornhuetter-Ferguson technique to estimate ultimate losses for accident year 2012.
Part a (3 points)
Answer this question and see the worked solution