CAS Exam 5 Fall 2014, Question 20
Study guide: Exam 5
The following information is available for an insurance company:
Cumulative Paid Claims ($000) as of (months)
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2010 | 1,050 | 2,350 | 4,370 | 6,250 |
| 2011 | 1,100 | 3,970 | 6,350 | |
| 2012 | 1,160 | 4,860 | ||
| 2013 | 1,460 |
Case Outstanding ($000) as of (months)
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2010 | 520 | 2,200 | 1,790 | 1,500 |
| 2011 | 600 | 1,270 | 690 | |
| 2012 | 730 | 770 | ||
| 2013 | 920 |
Closed Claim Counts (000) as of (months)
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2010 | 5 | 7 | 10 | 13 |
| 2011 | 5 | 9 | 12 | |
| 2012 | 5 | 10 | ||
| 2013 | 6 |
Open Claim Counts (000) as of (months)
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2010 | 3 | 4 | 3 | 1 |
| 2011 | 3 | 2 | 1 | |
| 2012 | 3 | 1 | ||
| 2013 | 3 |
| Accident Year | Projected Ultimate Claim Counts (000) |
|---|---|
| 2010 | 13 |
| 2011 | 13 |
| 2012 | 13 |
| 2013 | 13 |
The interpolation of cumulative paid claims (in $000s) by accident year (AY) is as follows:
| Closed Claim Counts | AY 2010 | AY 2011 | AY 2012 |
|---|---|---|---|
| 5 | 1,050 | 1,100 | 1,160 |
| 6 | 1,700 | 1,818 | 1,900 |
| 7 | 2,350 | 2,535 | 2,640 |
| 8 | 3,023 | 3,253 | 3,380 |
| 9 | 3,697 | 3,970 | 4,120 |
| 10 | 4,370 | 4,763 | 4,860 |
| 11 | 4,997 | 5,557 | |
| 12 | 5,623 | 6,350 | |
| 13 | 6,250 |
- The selected annual severity trend rate for all maturities is 5%.
- Use an all-year simple average to determine age-to-age claim development factors.
- There is no development beyond 48 months.
Calculate an estimate of ultimate claims for accident year 2013 utilizing the reported Berquist-Sherman method with adjustments reflecting changes in both case outstanding and claim settlement rates.
Part a (3.75 points)
Answer this question and see the worked solution