CAS Exam 5 Fall 2017, Question 5
Study guide: Exam 5
Given the following information for an insurance company as of December 31, 2016:
| Accident Year | Earned Premium ($000) | Reported Loss ($000) | Cumulative Loss Development Factors |
|---|---|---|---|
| 2012 | 3,000 | 1,500 | 1.05 |
| 2013 | 3,500 | 1,925 | 1.10 |
| 2014 | 3,300 | 1,749 | 1.20 |
| 2015 | 3,200 | 1,984 | 1.35 |
| 2016 | 3,800 | 2,470 | 1.40 |
- All policies are annual.
- Annual loss cost trend = 3%.
- The company has increased rates by 5% every year on January 1.
- The company writes policies uniformly throughout the year.
Calculate accident year 2016 trended ultimate loss using the Bornhuetter-Ferguson method with the expected loss ratio based on accident years 2012 through 2014 experience.
Part a (2 points)
Answer this question and see the worked solution
Concepts tested
- Bornhuetter-Ferguson Method
- On Level Premium
- Loss Trend
- Loss Development
- Rate Level Change
- Parallelogram Method