CAS Exam 5 Fall 2017, Question 1
Study guide: Exam 5
Given the following information:
| Calendar Year | Average Earned Premium at Current Rate Level | Average Written Premium at Current Rate Level |
|---|---|---|
| 2014 | $210 | $212 |
| 2015 | $220 | $224 |
| 2016 | $235 | $240 |
- The projected annual premium trend = -2%.
- Fourth quarter 2016 average earned premium at current rate level = $236.
- Fourth quarter 2016 average written premium at current rate level = $242.
- The company uses a calendar-accident year aggregation of data for indications.
- All policies are annual.
- Rates are in effect for one year.
- The rate revision is planned to be effective January 1, 2018.
Part a (1 point)
Calculate the premium trend factor for each year using two-step trending.
Part b (0.5 points)
Identify two scenarios that could lead to a negative premium trend when analyzing average premium at current rate level.
Answer this question and see the worked solution