CAS Exam 5 Fall 2019, Question 25
Study guide: Exam 5
Given the following information for a company:
| Value | Item |
|---|---|
| 5.00 | 12-Ultimate Gross Paid Claims Development Factor |
| 3.30 | 24-Ultimate Gross Paid Claims Development Factor |
| 12,000,000 | Accident Year 2018 Paid Gross Claims @ 12 Months |
| Incremental Gross Industry Payment Pattern for 12 to 24 Months, by Quarter | 12-15 | 15-18 | 18-21 | 21-24 |
|---|---|---|---|---|
| Percent Paid | 50% | 35% | 10% | 5% |
| Value | Item |
|---|---|
| 1,450,000 | Accident Year 2018 Actual Net Paid Claims for 15-18 Months |
- The company maintains a quota share reinsurance agreement where they cede 30% of the business.
- Ultimate losses are estimated using the paid development technique.
Part a (1.25 points)
Calculate the accident year 2018 expected net paid claims for the period 15 to 18 months, based on the following:
i) claims emerge uniformly between evaluation points.
ii) the industry payment pattern.
Part b (0.5 points)
Recommend whether to change the net estimated unpaid based on the actual results for accident year 2018 in the 15-to-18 month period.
Answer this question and see the worked solution
Concepts tested
- Actual vs Expected Analysis
- Net of Reinsurance
- Loss Development
- Unpaid Claims
- Reasonableness Testing