CAS Exam 5 Fall 2019, Question 22
Study guide: Exam 5
Given the following data as of December 31, 2018:
| Cumulative Paid Claims ($000) Gross of Salvage & Subrogation — Accident Year | 12 | 24 | 36 |
|---|---|---|---|
| 2015 | 17,500 | 21,500 | 24,000 |
| 2016 | 19,000 | 23,500 | 25,700 |
| 2017 | 18,500 | 22,800 | |
| 2018 | 18,100 |
| Cumulative Received Salvage and Subrogation ($000) — Accident Year | 12 | 24 | 36 |
|---|---|---|---|
| 2015 | 1,150 | 4,050 | 5,300 |
| 2016 | 1,180 | 4,300 | 5,680 |
| 2017 | 1,200 | 4,250 | |
| 2018 | 850 |
| Value | Item |
|---|---|
| 1.40 | 12 to ultimate development factor for paid claims gross of salvage & subrogation |
- There is no development beyond 36 months.
Part a (1.75 points)
Estimate the salvage and subrogation recoverable for accident year 2018 using the ratio approach. Justify the selected ultimate salvage and subrogation ratio.
Part b (0.5 points)
Briefly discuss two advantages of the ratio approach as compared to the development approach.
Answer this question and see the worked solution