CAS Exam 5 Fall 2018, Question 23
Study guide: Exam 5
Given the following information as of December 31, 2017:
Cumulative Paid Claims Only ($) as of (months)
| Accident Year | 12 | 24 | 36 |
|---|---|---|---|
| 2014 | 172,000 | 464,400 | 626,900 |
| 2015 | 168,000 | 453,600 | |
| 2016 | 170,000 |
| Accident Year | Calendar Year 2017 Paid Claims Only ($) |
|---|---|
| 2014 | 75,200 |
| 2015 | 158,800 |
| 2016 | 289,000 |
| 2017 | 172,000 |
Cumulative Paid ALAE ($) as of (months)
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2014 | 5,500 | 27,000 | 40,000 | 55,000 |
| 2015 | 5,600 | 26,000 | 39,000 | |
| 2016 | 5,700 | 26,000 | ||
| 2017 | 5,600 |
- There is no development beyond 48 months.
Part a (0.25 points)
Calculate the last diagonal of the Cumulative Paid Claims Only triangle as of December 31, 2017.
Part b (1.75 points)
Estimate ultimate ALAE for Accident Year 2017 using an additive ratio approach.
Part c (0.25 points)
Identify one disadvantage of using a ratio technique to estimate ALAE.
Answer this question and see the worked solution