CAS Exam 5 Spring 2017, Question 26
Study guide: Exam 5
The following graph shows the results of four techniques for estimating the ultimate claim ratio for accident year 2013, as of December 31 for each year shown.
Accident year 2013 ultimate claim ratio, evaluated as of December 31 of each year (values read from the bar chart):
| Technique | 2013 | 2014 | 2015 | 2016 |
|---|---|---|---|---|
| Paid Development | 55% | 95% | 94% | 125% |
| Reported Development | 120% | 105% | 96% | 95% |
| Paid B-F | 70% | 85% | 88% | 110% |
| Reported B-F | 95% | 90% | 92% | 94% |
Part a (0.5 points)
The actuary selected an ultimate claim ratio of 100% as of December 31, 2013. Assess the reasonability of this estimate using only information known as of December 31, 2013.
Part b (0.5 points)
Discuss the relative position of the ultimate claim ratio for the reported Benktander technique versus the other techniques if the reported Benktander technique were added to the graph as of December 31, 2013.
Part c (0.5 points)
Identify two questions that the actuary should ask company management based on the results observed for all four evaluations of accident year 2013.
Answer this question and see the worked solution
Concepts tested
- Loss Reserving
- Benktander Method
- Bornhuetter-Ferguson Method
- Case Reserves
- Reasonableness Testing
- Changing Conditions