CAS Exam 5 Spring 2015, Question 25
Study guide: Exam 5
Given the following information:
| Year | Calendar Year: Paid ULAE | Calendar Year: Paid Claims | Calendar Year: Reported Claims | Ultimate on Claims Reported in Calendar Year | Accident Year: IBNR as of December 31, 2014 | Accident Year: Reported Claims |
|---|---|---|---|---|---|---|
| 2011 | $10,558 | $38,390 | $85,521 | $106,900 | $5,095 | $103,305 |
| 2012 | $13,039 | $58,297 | $128,672 | $154,300 | $16,140 | $140,560 |
| 2013 | $13,143 | $86,074 | $145,070 | $163,100 | $34,477 | $128,923 |
| 2014 | $15,286 | $105,466 | $163,626 | $176,400 | $56,141 | $120,959 |
- Case outstanding at December 31, 2014 is $205,520.
- Total IBNR at December 31, 2014 is $111,853.
Part a (0.5 points)
Discuss why the classical technique is not appropriate to estimate unpaid ULAE in this scenario.
Part b (1.75 points)
Estimate unpaid ULAE as of December 31, 2014 using an alternative technique that corrects for the issue identified in part a. above. Justify both the approach used and the selected ULAE ratio.
Answer this question and see the worked solution