CAS Exam 5 Fall 2014, Question 23

Study guide: Exam 5

The following information is available for an insurance company that began writing business in 2010:

Cumulative Paid Claims as of (months)

• The actuary has selected a 24-month cumulative paid claim development factor of 1.25.
• The initial expected claims for accident year 2013 are $31,500.
• Case outstanding for accident year 2013 as of December 31, 2013 is $5,720.

Part a (1.25 points)

Estimate IBNR for accident year 2013 as of December 31, 2013 using the paid Bornhuetter-Ferguson technique.

Part b (1.25 points)

Estimate unpaid ULAE for accident year 2013 as of December 31, 2013, using the classical technique and the results from part a. above.

Part c (0.75 points)

State the key assumptions of the classical technique, and briefly comment on the appropriateness of utilizing the classical technique in estimating unpaid ULAE for this company.

Part d (0.5 points)

Describe a refinement to the classical technique that can be used to derive a reasonable estimate of unpaid ULAE for this company.

Answer this question and see the worked solution

Concepts tested

• Unallocated Loss Adjustment Expenses ULAE
• Accident Year
• Development Factor
• Bornhuetter-Ferguson Method

More questions from this set

• CAS Exam 5 Fall 2014, Question 22
• CAS Exam 5 Fall 2014, Question 24