CAS Exam 5 Fall 2018, Question 4
Study guide: Exam 5
Given the following information:
| Report Year | Loss Costs by Report Year Lag ($), Lag 0 | Lag 1 | Lag 2 |
|---|---|---|---|
| 2015 | 500 | 300 | 200 |
| 2016 | 525 | 330 | 210 |
| 2017 | 550 | 365 | 220 |
Part a (0.25 points)
Calculate the report year 2015 loss costs for a claims-made policy.
Part b (0.25 points)
Calculate the accident year 2015 loss costs for an occurrence policy.
Part c (0.5 points)
Compare the effect of an unexpected increase in underlying trend on the accuracy of the pricing for a claims-made policy and an occurrence policy. Briefly explain why one of the policies is impacted more than the other.
Part d (0.25 points)
Briefly explain why the risk of reserve inadequacy is reduced for a claims-made policy relative to an occurrence policy.
Part e (0.25 points)
Briefly describe why the investment income earned from claims-made policies is less than under occurrence policies.
Answer this question and see the worked solution