CAS Exam 5 Spring 2014, Question 16
Study guide: Exam 5
An insurance company writes general liability insurance and purchases excess-of-loss reinsurance. On January 1, 2013, the insurance company implemented a new reserving process which resulted in a large increase in the average case outstanding for claims occurring in 2013.
The following information is available as of December 31, 2013:
Reported Claim Counts
| Accident Year | Revenue ($000) | Ground-Up | Excess of Reinsurance Attachment Point |
|---|---|---|---|
| 2011 | 3,400 | 1,750 | 220 |
| 2012 | 3,500 | 1,700 | 140 |
| 2013 | 3,600 | 1,500 | 90 |
Reported Claim Count Development Factor to Ultimate (prior to operational change)
| Age (months) | Ground-Up | Excess of Reinsurance Attachment Point |
|---|---|---|
| 36-Ult | 1.000 | 1.500 |
| 24-Ult | 1.040 | 2.500 |
| 12-Ult | 1.200 | 6.000 |
- Annual revenue trend: 3%.
- Annual total frequency trend: 2%.
- Annual excess frequency trend: 5%.
Calculate the insurer's ultimate claim counts that do not exceed the attachment point for accident year 2013.
Part a (2.75 points)
Answer this question and see the worked solution
Concepts tested
- Net of Reinsurance
- Large Loss
- Reinsurance
- Accident Year
- Exposure Trend
- Changing Conditions
- Frequency-Severity Method