CAS Exam 5 Spring 2019, Question 22
Study guide: Exam 5
Given the following:
Average Case Outstanding ($) on Large Claims as of (months):
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2015 | 650 | 700 | 720 | 850 |
| 2016 | 670 | 700 | 900 | |
| 2017 | 750 | 1,000 | ||
| 2018 | 1,200 |
Average Case Outstanding ($) on Small Claims as of (months):
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2015 | 75 | 310 | 75 | 50 |
| 2016 | 80 | 400 | 65 | |
| 2017 | 110 | 190 | ||
| 2018 | 90 |
Open Large Claim Counts as of (months):
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2015 | 14 | 16 | 18 | 22 |
| 2016 | 15 | 18 | 20 | |
| 2017 | 11 | 13 | ||
| 2018 | 10 |
Open Small Claim Counts as of (months):
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2015 | 150 | 115 | 100 | 80 |
| 2016 | 155 | 130 | 120 | |
| 2017 | 145 | 120 | ||
| 2018 | 150 |
Cumulative Paid Claims ($) on Large Claims as of (months):
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2015 | 520,000 | 802,000 | 1,021,000 | 1,140,000 |
| 2016 | 510,000 | 789,000 | 1,008,000 | |
| 2017 | 540,000 | 829,000 | ||
| 2018 | 525,000 |
Cumulative Paid Claims ($) on Small Claims as of (months):
| Accident Year | 12 | 24 | 36 | 48 |
|---|---|---|---|---|
| 2015 | 25,000 | 55,000 | 174,000 | 268,000 |
| 2016 | 23,000 | 37,000 | 170,000 | |
| 2017 | 20,000 | 67,000 | ||
| 2018 | 22,000 |
| 5% | Annual severity trend |
Cumulative Unadjusted Reported Claim Development Factors:
| Age | 12-to-Ult | 24-to-Ult | 36-to-Ult | 48-to-Ult |
|---|---|---|---|---|
| Large Claims | 2.638 | 1.715 | 1.345 | 1.200 |
| Small Claims | 9.007 | 3.597 | 1.798 | 1.200 |
- Large claims are defined as greater than or equal to $500,000 in reported claims and small claims are defined as less than $500,000 in reported claims.
- In 2018, the company hired additional claims handling personnel to increase the case reserve adequacy on large claims.
- Case reserves for small claims are not impacted by the change in claims handling personnel.
- There have been no changes to settlement rates.
Calculate the estimated ultimate claims for accident year 2018 using the reported development technique adjusting for the change in case reserve adequacy.
Part a (2.5 points)
Answer this question and see the worked solution