CAS Exam 5 Fall 2014, Question 19

Study guide: Exam 5

For each situation below an insurer uses the reported development technique based on its historical accident year data to set reserves. For each situation:

i. Discuss the effect on estimated ultimate claims and ii. Identify either an alternate technique or an adjustment to the reported development technique to improve the estimate, if necessary.

Part a (0.75 points)

Mid-year the company institutes a new policy for setting case outstanding for open claims, in which case outstanding is set at policy limits.

Part b (0.75 points)

The company had historically stable writings, but undertakes an advertising initiative in the second quarter and increases its premium volume written through the end of the year by 300%.

Part c (0.75 points)

At the beginning of the year, the company began offering a general liability product covering losses in excess of its basic limits.

Answer this question and see the worked solution

Concepts tested

• Loss Development
• Berquist-Sherman Method
• Loss Ratio
• Accident Year
• Changing Conditions
• Case Adequacy
• Mix of Business

More questions from this set

• CAS Exam 5 Fall 2014, Question 18
• CAS Exam 5 Fall 2014, Question 20