CAS Exam 5 Spring 2014, Question 15
Study guide: Exam 5
Given the following data as of December 31, 2013:
| Accident Year | Earned Premium ($000) | On-level Earned Premium Factors | Reported Claims ($000) | Reported Development Factor to Ultimate |
|---|---|---|---|---|
| 2010 | 1,100 | 1.35 | 700 | 1.10 |
| 2011 | 1,300 | 1.30 | 750 | 1.40 |
| 2012 | 1,400 | 1.20 | 500 | 1.70 |
| 2013 | 1,800 | 1.00 | 750 | 2.00 |
- Annual pure premium trend: 5%.
- Bornhuetter-Ferguson expected claims ratio: 57%.
Part a (0.5 points)
Calculate the accident year 2013 IBNR using the Bornhuetter-Ferguson technique as of December 31, 2013.
Part b (1.75 points)
Calculate the accident year 2013 IBNR using the Cape Cod technique as of December 31, 2013.
Part c (0.5 points)
Briefly explain whether the Bornhuetter-Ferguson or the Cape Cod technique is more appropriate in the following scenarios:
i. Decrease in underlying claims ratio. ii. Thin or volatile data.
Answer this question and see the worked solution