CAS Exam 5 Fall 2017, Question 4
Study guide: Exam 5
Given the following information for an insurance company:
- All policies are annual.
- For all claims reported in one year, 40% of the ultimate loss is from claims occurring in the same year, 35% from the prior year and 25% from the 2nd prior year.
- Annual report year loss cost trend = 3%.
- The company writes policies uniformly through the year.
- Exposure levels are constant.
- For report year 2013, the loss cost per exposure from claims occurring in 2013 = $200.
Part a (1 point)
Calculate the loss cost per exposure for the following:
i. Occurrence policy effective January 1, 2016
ii. Claims-made policy effective January 1, 2018 with retroactive date of January 1, 2017
Part b (0.5 points)
A customer is switching from a claims-made policy to an occurrence policy effective January 1, 2016. Calculate the total loss cost per exposure that would provide complete coverage without overlap for this customer.
Answer this question and see the worked solution