CAS Exam 5 Fall 2017, Question 28
Study guide: Exam 5
Given the following ultimate claim ratio estimates based on reported claims as of December 31, 2016:
| Accident Year | Development Technique | Bornhuetter-Ferguson Technique | Frequency-Severity Technique |
|---|---|---|---|
| 2012 | 61.9% | 61.9% | 61.9% |
| 2013 | 61.6% | 60.3% | 61.2% |
| 2014 | 61.8% | 57.1% | 61.7% |
| 2015 | 61.5% | 52.4% | 61.8% |
| 2016 | 72.4% | 50.7% | 61.7% |
- The initial expected loss ratio used in the Bornhuetter-Ferguson technique is the same in all accident years.
- There has been no change to the mix of business written by the company.
- The company has not experienced any unusually large losses.
Part a (0.5 points)
Assess the selected claim development factors used in the techniques.
Part b (0.5 points)
Assess the initial expected loss ratio used in the Bornhuetter-Ferguson technique.
Answer this question and see the worked solution
Concepts tested
- Bornhuetter-Ferguson Method
- Loss Development
- Frequency-Severity Method
- Loss Ratio
- Reasonableness Testing
- Age to Age Factor