CAS Exam 5 Fall 2016, Question 21
Study guide: Exam 5
An actuary is estimating the IBNR for a company using the data below, as of December 31, 2015.
| Accident Year | Reported Claims ($000) | On-Level Earned Premium ($000) | Reported Development Technique Ultimate Claims Estimate ($000) |
|---|---|---|---|
| 2012 | 1,275 | 2,400 | 1,339 |
| 2013 | 1,152 | 2,300 | 1,355 |
| 2014 | 932 | 2,200 | 1,370 |
| 2015 | 604 | 2,100 | 1,332 |
- The actuary estimates the expected claims ratio to be 60% for all years.
- There is no loss trend.
Part a (0.75 points)
Estimate the accident year 2015 IBNR using the Bornhuetter-Ferguson technique.
Part b (0.75 points)
Fully assess the reasonableness of the 60% expected claims ratio assumption.
Part c (0.5 points)
Recommend and briefly justify a technique that would be more appropriate than the Bornhuetter-Ferguson for this data set.
Answer this question and see the worked solution