CAS Exam 5 Fall 2016, Question 26
Study guide: Exam 5
Given the following information:
| Accident Year | Exposures | Ultimate Claims ($) |
|---|---|---|
| 2012 | 10,000 | 1,000,000 |
| 2013 | 10,000 | 1,020,000 |
| 2014 | 10,000 | 1,040,000 |
| 2015 | 10,000 | 1,061,000 |
| Calendar Year | Reported Claims ($) | Paid Claims ($) | Paid ULAE ($) |
|---|---|---|---|
| 2012 | 995,000 | 990,000 | 100,000 |
| 2013 | 1,015,000 | 1,010,000 | 110,000 |
| 2014 | 1,035,000 | 1,030,000 | 121,000 |
| 2015 | 1,056,000 | 1,051,000 | 133,100 |
- Case outstanding as of December 31, 2015 = $180,000.
- IBNR as of December 31, 2015 = $50,000.
Part a (0.75 points)
Using the classical paid-to-paid technique, estimate the unpaid ULAE as of December 31, 2015.
Part b (1 point)
Fully discuss how a key assumption of the classical technique is being violated in part a. above.
Part c (0.5 points)
Discuss whether or not the Kittel refinement will correct the issue identified in part b. above.
Answer this question and see the worked solution