CAS Exam 5 Fall 2014, Question 5
Study guide: Exam 5
The following information is available for a homeowners insurance company as of December 31, 2013:
| Period (months) | Reported Loss and ALAE Age-to-Age Development Factors |
|---|---|
| 12-24 | 1.10 |
| 24-36 | 1.05 |
| 36-48 | 1.01 |
| Calendar/Accident Year | Earned Exposures (000) | Amount of Insurance Years (AIY) ($000) | Reported Non-Catastrophe Loss and ALAE ($000) |
|---|---|---|---|
| 2011 | 45 | 13,500 | 23,000 |
| 2012 | 50 | 15,300 | 25,000 |
| 2013 | 40 | 12,500 | 20,000 |
- Annual loss and ALAE trend = 4%.
- Historical non-catastrophe ULAE to loss and ALAE ratio = 1.05.
- Historical catastrophe ULAE to loss and ALAE ratio = 1.09.
- Long-term non-modeled catastrophe loss and ALAE-to-AIY ratio = 0.25.
- Modeled catastrophe loss and ALAE-to-AIY ratio = 0.07.
- Rates will take effect on January 1, 2015, and will be in effect for one year.
- All policies are annual.
- Assume no development after 48 months.
Using three years of historical data, determine the provision for loss and LAE to be used in the pure premium indication.
Part a (3.25 points)
Answer this question and see the worked solution