CAS Exam 5 Spring 2016, Question 11
Study guide: Exam 5
Given the following loss distribution for accident year 2015 by policy limit:
| Size of Loss | $100,000 Limit: Claims | 100,000 Limit: Losses (000) |
$250,000 Limit: Claims | 250,000 Limit: Losses (000) |
$500,000 Limit: Claims | 500,000 Limit: Losses (000) |
|---|---|---|---|---|---|---|
| X <= $100,000 | 210 | 14,000 | 40 | 3,000 | 50 | 3,000 |
100,000 < X <= 250,000 |
50 | 9,000 | 40 | 7,000 | ||
250,000 < X <= 500,000 |
10 | 4,000 | ||||
| Total | 210 | 14,000 | 90 | 12,000 | 100 | 14,000 |
Part a (1 point)
Calculate the increased limits factor for 250,000 assuming a basic limit of 100,000.
Part b (0.25 points)
Assume a ground-up annual severity trend of 10% applies to the data above. Briefly discuss how the increased limits factor estimate would change for future accident years without performing any additional calculations.
Part c (0.5 points)
Calculate the complement of credibility for the excess layer between 250,000 and 500,000 using the industry increased limits factors below.
| Limit of Liability | Increased Limits Factor |
|---|---|
| $100,000 | 1.00 |
| $250,000 | 1.50 |
| $500,000 | 1.90 |
| $750,000 | 2.25 |
| $1,000,000 | 2.50 |
Answer this question and see the worked solution