CAS Exam 5 Fall 2016, Question 5
Study guide: Exam 5
(2.25 points)
An insurance company purchases per risk excess-of-loss reinsurance each year that covers individual claims that exceed the retention.
Given the following information as of December 31, 2015:
| Accident Year | Earned Exposures | Direct Ultimate Losses ($000) | Claim Counts |
|---|---|---|---|
| 2013 | 1,850 | 185,000 | 185 |
| 2014 | 1,750 | 190,000 | 175 |
| 2015 | 1,650 | 199,500 | 165 |
Ultimate Value of Direct Claims Excess of $500,000:
| Accident Year | Claim | Direct Ultimate Loss of Individual Claims ($000) |
|---|---|---|
| 2013 | A | 18,400 |
| 2013 | B | 3,200 |
| 2014 | C | 5,700 |
| 2014 | D | 5,200 |
| 2015 | E | 9,500 |
| 2015 | F | 6,200 |
| Accident Year | Retention ($000) |
|---|---|
| 2013 | 2,000 |
| 2014 | 5,000 |
| 2015 | 10,000 |
- Policies are annual.
- Policies are written uniformly throughout the year.
- Rates are expected to be in effect for one year.
- Planned rate revision to be effective January 1, 2017.
Calculate the average trended pure premium net of reinsurance at the current $10,000,000 retention.
Part a (2.25 points)
Answer this question and see the worked solution