CAS Exam 5 Fall 2018, Question 16
Study guide: Exam 5
An insurance company with a book of business (Book A) has recently acquired a smaller book of business (Book B) in the same state and line of business. Given the following as of December 31, 2017:
Book A — Reported Claims ($000) as of (months)
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2014 | 55,000 | 92,000 | 112,500 | 123,700 |
| 2015 | 54,800 | 92,600 | 111,100 | |
| 2016 | 57,000 | 94,400 | ||
| 2017 | 62,600 |
| Calendar Year | Book A Earned Premium ($000) |
|---|---|
| 2014 | 175,200 |
| 2015 | 179,400 |
| 2016 | 182,800 |
| 2017 | 184,200 |
| 75% | Book A expected claims ratio |
| 1.06 | 48 to ultimate reported claim development factor |
Book B — Reported Claims ($000) as of (months)
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2014 | 2,600 | 5,900 | 6,700 | 7,500 |
| 2015 | 3,500 | 4,300 | 6,000 | |
| 2016 | 2,600 | 2,700 | ||
| 2017 | 4,400 |
| Calendar Year | Book B Earned Premium ($000) |
|---|---|
| 2014 | 8,700 |
| 2015 | 9,700 |
| 2016 | 11,000 |
| 2017 | 13,900 |
Part a (0.75 points)
Calculate the Book A ultimate claims for accident year 2015 using the reported development technique.
Part b (0.5 points)
Calculate the Book A ultimate claims for accident year 2016 using the Bornhuetter-Ferguson technique.
Part c (0.25 points)
Calculate the Book A ultimate claims for accident year 2017 using the expected claims technique.
Part d (0.5 points)
Recommend an approach for estimating ultimate claims for Book B in accident year 2015 without performing any calculations. Justify all assumptions.
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