CAS Exam 5 Spring 2016, Question 18

Study guide: Exam 5

An actuary is considering whether to use the Cape Cod technique or the Bornhuetter-Ferguson technique.

Part a (0.5 points)

Briefly describe one similarity and one difference between the Cape Cod and Bornhuetter-Ferguson techniques.

Part b (0.5 points)

Identify two adjustments to reported claims that may be needed before applying either technique.

Part c (0.5 points)

Identify two adjustments to earned premium that may be needed before applying either technique.

Part d (0.5 points)

A court decision in 2014 resulted in larger payments to be paid to claimants. Justify which technique would be more appropriate for estimating the accident year 2015 IBNR.

Answer this question and see the worked solution

Concepts tested

• Bornhuetter-Ferguson Method
• Insurance Premium
• Chain Ladder Method
• Trend
• Cape Cod Method
• Rate Level Change
• Loss Trend

More questions from this set

• CAS Exam 5 Spring 2016, Question 17
• CAS Exam 5 Spring 2016, Question 19