CAS Exam 5 Fall 2016, Question 3
Study guide: Exam 5
Given the following data for an insured:
Reported Loss ($) by Report Year Lag:
| Report Year | Lag 0 | Lag 1 | Lag 2 | Lag 3 | Lag 4 |
|---|---|---|---|---|---|
| 2011 | 75,300 | 84,000 | 62,400 | 59,000 | 39,800 |
| 2012 | 65,000 | 63,200 | 84,000 | 80,200 | 62,100 |
| 2013 | 82,100 | 49,900 | 55,000 | 60,600 | 72,300 |
| 2014 | 90,000 | 77,000 | 104,300 | 45,000 | 88,300 |
| 2015 | 71,800 | 89,000 | 62,000 | 91,500 | 46,600 |
- Policies run from January 1 through December 31.
- The insured's coverage changed from occurrence to claims-made on January 1, 2013 with a retroactive date of January 1, 2013.
Part a (0.25 points)
Calculate the reported losses for the 2012 occurrence policy as of December 31, 2015.
Part b (0.25 points)
Calculate the reported losses for the 2014 claims-made policy as of December 31, 2015.
Part c (0.5 points)
Describe how a switch from occurrence to claims-made coverage could affect an insurer's loss reserve risk.
Part d (0.5 points)
Describe how a switch from occurrence to claims-made coverage could affect the target underwriting profit provision.
Answer this question and see the worked solution